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Interest rate up 25 basis points, prime 10.25%

interest ratesThe South African Reserve Bank’s Monetary Policy Committee (MPC) made good on predictions of a 25 basis point increase to the Repo rate, which takes the prime lending rate to 10.25%.

“Clearly there are still inflation risks which may incline the MPC towards continuing on a modest hiking cycle in the New Year, particularly as the rand remains vulnerable to shifting investor sentiment and monetary policy tightening in the developed world,” said Andrew Golding, CE of the Pam Golding Property Group. “It would thus be wise for home buyers – particularly first-time purchasers – to factor this in along with the other costs associated with acquiring residential property.

On a positive note, we continue to see pockets of robust and also renewed activity in the housing market. Pam Golding Properties is seeing an uptick in sales in areas of Cape Town such as the Atlantic Seaboard, Southern Suburbs, Blouberg and Durbanville which have picked up considerable steam; Gauteng’s Hyde Park, Fourways and Pretoria; and in KwaZulu-Natal the region north of Durban, while areas of the Eastern Cape such as East London and Port Elizabeth are also more than holding their own.”

Despite the increase in rates, the interest rate is still at some of the best levels in years, according to the Seeff Group which said it did not expect much of an impact on the property market.

“The bigger impact is coming from the socioeconomic environment and only once some these are resolved are we likely to see the next upward phase,” said Stuart Manning, CEO for the Seeff Property Group. “While we are looking forward to a much improved 2019, the reality is that with the General Election scheduled for May, it is likely that any uptick will only really be seen from around mid-2019. We are therefore likely to kick off 2019 on much the same foot as we are now and will need to be patient for a while longer.”

The biggest challenge is that virtually all the pressure on inflation is supply driven, such as the weak exchange rate and increased cost of fuel, said Herschel Jawitz, CEO of Jawitz Properties.

“There is zero demand pressure on inflation. This extends to rental inflation which is part of the basket of goods and services used to determine the CPI numbers,” said Jawitz. “According to the latest FNB Property Insights report, the actual increase in year-on-year rentals is just over 4% but the escalation in rates and non-electricity utilities sits at a much higher figure of 11% – once again, a supply-side issue. The increase in rates will continue to contribute to a subdued residential market from a demand point of view. With inflation at 5.1%, property prices will continue to decline in real terms after inflation across most parts of the country which means that the current residential market offers the best value to buyers since the market crash in 2009 – for those buyers who wish to get into the market.”

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david.steynberg@gmail.com

David A Steynberg, managing editor and director of HomeTimes, has more than 10 years of experience as both a journalist and editor, having headed up Business Day’s HomeFront supplement, SAPOA’s range of four printed titles, digimags Asset in Africa and the South African Planning Institute’s official title, Planning Africa, as well as B2B titles, Building Africa and Water, Sewage & Effluent magazines. He began his career at Farmer’s Weekly magazine before moving on to People Magazine where he was awarded two Excellence Awards for Best Real Life feature as well as Writer of the Year runner-up. He is also a past fellow of the International Women’s Media Foundation.

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