Interest rate a boon for property market.

The steady repo rate is good news for the property market, according to Dr Andrew Golding, CEO of Pam Golding Properties.

He responded to the decision by the SA Reserve Bank's Monetary Policy Committee (MPC) on Thursday to keep the repo rate unchanged.

“Maintaining stability in the interest rate sends a positive message and reinforces much needed confidence among home buyers and investors and hopefully will further improve sentiment and add impetus to the recovery in the property market,” he said.

“Coupled with this is the fact that mortgage lenders are demonstrating an increased appetite for lending which is ultimately the most important driver of activity in our property market."

He said one does, however, need to be circumspect regarding this optimism in the light of Consumer Price Index (CPI) inflation edging upwards.

"Consumers will continue to be beset by rising food and fuel costs, as well as electricity, water and municipal rates and tariffs, all of which erode disposable income," said Golding.

Another source of concern for him is the extent to which the country’s GDP growth is lagging targets required for sustainable growth, which is necessary for the property market to prosper and thrive.
 
“On another, positive note, the peaceful election with very little disruption served to reassure markets - the property market included,” said Golding.

Seeff chair Samuel Seeff also sees the decision by Sarb to retain the repo rate at 5.5% as a welcome reprieve for the property market.

He said it will further boost buyer confidence.

"For the first time in six years, we can confidently say that housing is in a growth phase and stability right now is more important than ever," he said.

"On the back of the continued sluggish economic growth and creeping inflation, a rate hike towards the third or fourth quarter of the year though is probably unavoidable."

He said although a rate hike is unlikely to seriously dent the buoyant buyer activity, largely due to the pent-up demand that has been building over the last few years, it will affect the affordable, sub-R1.5m sector of the market.

"While household debt on the whole has been coming down, a rate hike will most certainly see home loan affordability take a knock as will the ability of consumers to service their monthly debt including their bond repayments," said Seeff.

"The knock-on effect on the basic cost of living with increases in the prices of especially food and transport will put further pressure on the already burdened household budgets."

He said consumers should, therefore, continue to focus on paying off their debts, put off on luxuries and save. www.fin24.com