The Monetary Policy Committee has announced that interest rates will remain unchanged, leaving the repo rate at 3.5% and the prime lending rate at 7%.
While the decision is regarded as disappointing and an anti-climax in a year of record rate cuts property professionals are still grateful for the current market conditions that have seen buying levels spike over the past few months.
They are also comforted by the high possibility that interest rates will remain low into the new year.
“There is the possibility that there will be a slight increase of around 0.5 points for 2021, but this should not have a great impact on the property market,” says Adrian Cosslett, chief executive of Re/Max of Southern Africa.
“As things stand, the low-interest rates (in conjunction with other factors) have created a housing market boom, particularly within the first-time buyers’ market.”
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Andrew Golding, chief executive of the Pam Golding Group says the MPC was prompted to err on the side of caution following South Africa’s slow pace of fiscal consolidation and resultant elevated fiscal risks.
“Furthermore, the MPC has previously pointed out that the full impact of prior interest rates has yet to be felt – typically taking between 12 and 18 months to feed through the economy, and that a further 25 basis point rate cut would be unlikely to add any meaningful further stimulus.”
Nonetheless, he too remains encouraged by the “continued strong uptake” in demand for residential property.
For the first time in a decade, says Samuel Seeff, chairman of the Seeff Property Group, the country has seen the low-interest rate driving demand which is exceeding analysts’ forecasts.
“We have seen some of the best trading months in six years and in some instances, better than at the height of the last 2015/6 mini property boom. This is driven predominantly by buyers with stable employment, relatively unaffected by the Covid Pandemic, and the favourable mortgage lending conditions.”
Carl Coetzee, chief executive of BetterBond notes that the lower interest rates have made homes 30% more affordable and also offer homeowners with the financial means to pay more into their bond to reduce their overall repayment period, the opportunity to do so.