Interest rate remains unchanged

24 Jan 2013

The decision by the Monetary Policy Committee to keep the repo rate unchanged at five percent and prime lending rate at 8.5 percent, was anticipated by many market commentators.

From a residential property market perspective, the historically low interest rate, which has remained relatively stable in recent years, serves as a confidence booster for home buyers, particularly those with mortgage bonds and who continue to feel the impact of rising energy, fuel and food costs.

From a residential property market perspective, the historically low interest rate, which has remained relatively stable in recent years, serves as a confidence booster for home buyers, particularly those with mortgage bonds and who continue to feel the impact of rising energy, fuel and food costs.

“General market sentiment at the start of 2013 has improved, translating into an air of increased confidence in the residential property market - which in turn is generating increasing enquiries from mainly serious buyers," Dr Andrew Golding, CE of the Pam Golding Property group.

For the calendar year to date (January 2013) Pam Golding Properties (PGP), he says has experienced a noticeable increase in website enquiries compared with the same period last year, which is a further indicator of increased activity in the market, particularly as the first few weeks of January 2012 saw an exceptionally high rate of website enquiries.

Dr Golding says while consumers remain faced with cost pressures, the sustained low interest rates are certainly a factor in assisting both buyers and sellers adjust to the ‘new normal’ trading conditions in the property marketplace. "As a result we are seeing a regularising in the marketplace, with more and more sellers being those who are doing so for reasons other than financial constraints - in other words normal movement or activity."

In regard to buyers, he says those with cash or high equity are seeking and still in a favourable position to take up good buying opportunities, which are available in a variety of locations and offer sound investment potential over the medium to longer term.

“Encouragingly we are seeing more and more first-time buyers enter the marketplace, while developers continue to demonstrate growing confidence in launching new developments to cater for a pent-up demand for new-build units in good locations and at market-related prices. "

Dr Golding says there also appear to be indications of increased interest from buy-to-let investors, and looking further afield they are also seeing rising interest from buyers from Africa and other international markets.

The first quarter of the year is also a time when historically people may be relocating for a variety of reasons, including work or family requirements such as educational facilities, a change in lifestyle, upsizing to a larger home or downsizing as adult children have left the family home, he says. "From a price perspective the main interest experienced by Pam Golding Properties is in the price range up to around R6 million or R7 million, although sales upwards of R10 million are also being achieved. All in all Pam Golding Properties’ outlook for the year ahead is positive and we are optimistic," says Dr Golding. 

Seeff Chairman, Samuel Seeff says with house prices set to remain flat this year and, combined with the low interest rate means that we are amidst the best buyers’ market in more than three decades. "Certainly, those who are able to buy right now should do so." Even a 1% to 2% interest rate hike would still make mortgages more affordable than five years ago, but this will not remain the case for too much longer, he says.

Homeowners though need to be mindful of utility price hikes with electricity prices likely to rise well above inflation over the next two years, says Seeff. Transport costs are also likely to continue climbing this year while basic food prices will, as a result see upward pressure. Homeowners and prospective buyers are therefore urged to take a conservative outlook and focus on bringing down their debt levels and preferably buy below their means, he says.

"There are plenty of good buys in the market and buyers are certainly able to find good value and smart buyers are taking advantage of the favourable buying conditions." Despite the tight home loan lending criteria, the banks are willing to lend when it makes financial sense, the buyer has a good credit record and is able to invest a deposit, Seeff adds.

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