Steady rates add to the festive cheer

THE recent announcement by the new Reserve Bank governor, Lesetja Kganyago that the bank’s Monetary Policy Committee would keep the repo rate unchanged at 5,75% (base home loan rate at 9,25%) is indeed welcome news for homeowners, prospective buyers and the economy as a whole, according to Seeff chairperson, Samuel Seeff.

As we head into the busiest period in the retail sector and one that needs a vital festive season boost, the decision to keep a bit more money in the pockets of consumers is the right one and adds a little more cheer to the property market, says Seeff.

While the recent credit downgrades have been disappointing, there are some encouraging signs on the economic front. The inflation rate has remained flat at 5,9% for the past two months, there are early signs that some stability is returning to the mining sector and, although still weak, the currency is holding relatively steady, he adds.

While the property market has largely shrugged off the economic challenges this year, it needs to be borne in mind that it is not entirely immune to economic volatility. Rising home loan rates will not only dent affordability, but are likely to dampen buyer confidence, especially at the middle and lower end of the market.

Bear in mind also that this is the time of year that consumers start thinking about their homeownership. For many, it is the first step onto the property ladder with their first home, while others may think that the time is right to take the leap and upgrade or even invest in a second property.

While the fragile economic landscape is likely to keep potential interest rate hikes on the horizon, at least for now, the decision is a welcome festive boost for the already buoyant demand in the housing market.

For the first time since 2007/8, there is now real upward movement in the housing market and this benefits the economy significantly, continues Seeff. Aside from the increased transfer duty that makes its way to state coffers, it creates knock-on economic benefits including more employment in the real estate sector.

Additionally, it encourages new development and much needed infrastructure upgrades, again adding vital economic benefits, not least of which jobs.

Looking towards next year, Seeff says although the economic outlook is one of subjugated caution with expected low economic and job growth and rising costs, including basic utilities such as electricity and, possible tax and interest rate hikes, he believes that the uptick in the market will be sustained into next year.

“We are finally ending a year on a cheerful note and we head to 2015 with a housing market on solid ground. There is good balance between demand and supply, tilting somewhat up on the demand side in favour of sellers on the back of almost country-wide stock shortages,” he says. “Market confidence is on a five-year high and there is still plenty of pent up demand to keep sellers in the driving seat.”