THE recent decision by the Reserve Bank’s Monetary Policy Committee to keep the repo rate unchanged at 5,75% (9,25% mortgage loan rate) is welcome news as the housing market continues its upward trend, says Seeff chairperson, Samuel Seeff.
For the first time since the 2007/8 downturn, sales activity is showing real upward movement, not only in the primary urban sectors, but also in the secondary coastal markets.
While the minor interest rate fluctuations over the last few years has had only a marginal effect on demand and sales, it is nonetheless important that stability is maintained, says Seeff.
“The market is now nicely balanced with strong demand and tight supply. Where conditions were overwhelmingly in favour of buyers, the pendulum has now shifted in favour of sellers.
“Buyer urgency has grown, there is limited supply of property and we are consequently seeing real activity in the market. Our branches report that not even the cold winter kept buyers at bay and they continue flocking to show houses in record numbers. Multiple offers are becoming commonplace, with sellers getting close to and, in some instances, more than their asking price. ”
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Where it took about 20 weeks to sell the average home post 2009, it now takes about two weeks, says Seeff.
The slow economic and job growth and inflationary pressure though, remain worrying factors, says Seeff. While activity in the property market is defying the economic trend, it remains a tight balance that can be disturbed by interest rate swings. Having said this, Seeff maintains that the mortgage loan rate of 9,25%, even having regard to the 75-basis point hikes this year, remains at a historic low. Bear in mind, he adds, that during the 2005-2007 boom period, the rate ranged between 10,5% and 13%.
Home owners and buyers though are cautioned to start preparing for a cycle of interest rate hikes over the next year, he says. Economists predict at least a 100-basis point hike, likely to be introduced in small increments of around 25-basis points over the next few quarters.
