Flat repo rate welcomed by homeowners

Flat repo rate welcomed by homeowners

Category News

The Reserve Bank’s Monetary Policy Committee (MPC) has decided to keep the repo rate at its current level of 6.5%. This decision appears to have been foreseen by the property market as the consumer inflation rate for June 2018 stood at 4.6% - 0.2% below the market expectation.

Market analysts say that despite the fluctuating currency exchange rates, the Reserve Bank is unlikely to change the interest rate for the remainder of 2018. Homeowners with mortgage bonds have welcomed this decision as their interest rates remain the same for the foreseeable future.

South African economy slow

“Bear in mind that consumers have had to absorb a number of cost hikes, most notably the petrol price increases, so any interest rate savings is a boon,” says CEO of the Seeff Property Group Stuart Manning.

“Aside from the economic pressure, the political noise and policy uncertainty around land expropriation remains a concern for the market. It has made many buyers, especially at the top end of the market, and those who do not have to buy right now, hesitant, both local and foreign buyers alike,” he continues.

Any further cost hikes from the government will add to the petrol price and currency woes that ordinary South Africans are facing. As a result, the economy could remain stagnant for the remainder of 2018, which will also affect the property market.

“The market is holding up well despite the economic challenges, and while slower, there is still price growth and plenty of reasons to buy. Many areas are seeing excellent trade, with especially the lower to mid-market sectors being quite active,” says Manning.

Each market has unique opportunities

However, Manning points out that there is an opportunity in every market - you just need to know where to look and when to act. A flat property market, characterised by an abundance of properties on sale, means that only serious buyers will be looking to make an offer.

Sellers are still receiving offers but their profit margins are quite reduced. That being said, there is still an opportunity to make a bit of money by selling or renting properties in the current market. According to Manning, when the sales side of the market dips, the rental side tends to grow. This means that landlords can still see returns on their investment.

Although an unchanged repo rate may not exactly encourage spending, it doesn’t stop savvy buyers from investing their money in property. Banks are also more likely to ease their conditions for granting bonds in the current market.

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Author: Seeff