'Belt tightening ahead' for homeowners as interest rate goes up
Homeowners and buyers will need to continue tightening their
belts as the interest rate climbs and the economic and property
market recovery takes longer than hoped.
This is the word from Stuart Manning, CEO of Seeff Property Group,
following the Reserve Bank's Monetary Policy Committee (MPC)
decision to hike the repo rate by 25 basis points to 6.75%
(from 6.50%), increasing the base home loan rate to 10.25% (from 10%).
Manning says that despite further inflation creep to 5.1% (although
still within the 3%-6% target range), there was "still reason to hope
for a stay ahead of the festive season", which could've brought a much
needed economic boost.
Nonetheless, even with this hike, the interest rate is still at some of
the best levels in years and the Seeff Group does not expect much of an
impact on the property market. The bigger impact is coming from the
socio-economic environment and only once some these are resolved are we
likely to see the next upward phase, he says.
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, says Manning.
Once the May General Election is out of the way and if we get a positive .
result that reinforces a mandate to President Ramaphosa to continue his
reforms, we will see this translate into more positive sentiment, so
critical for the economy and property market.
The president has demonstrated his commitment to rooting out corruption
and maladministration and returning to good governance. Recent successes
with his investment drive adds further to the positive outlook.
In the meantime, Manning says they welcome the busy summer tourist months,
a time when there is generally more positive sentiment in the property
market. "Conditions remain favourable for buyers who are able to find
good value given the flat price growth and rising stock levels, but don't
wait too long."
All economies and property markets go through cycles of ups and downs and
many will tell you if only they had bought at a particular time. While
price growth has flattened, there has been no price devaluation yet and
it is still safe to invest in property, he says.
Author: Veda Palmer