1% Interest rate drop has had an effect, says Steward

The 1% drop in interest rates, says Lanice Steward, MD of Anne Porter Knight Frank, has already had a stimulatory effect on the housing market – but, she says, sellers should not take this as a signal to start holding out for higher prices.

"As always in a slow sales period," she said, "some sellers have strongly resisted realistic valuations based on current market prices. The danger now is that they will again see this moderate relief as a turning point in the market - which would be premature - and hold out for the unrealistic prices that have resulted in some homes not being sold for weeks on end."

The 2,5% drop since December 2008, said Steward, allows a R1 million bondholder to pay R1 823 less each month. It is also means that double income couples applying for a R1 million bond can in theory now earn R5 460 per month less than previously and single applicants R7 292 less. (The rule of thumb followed by most loan institutions is that double income couples may spend one-third of their income on bond repayments and single people 25%.)

The drop in payments, said Steward, has helped buyers of properties priced under R1,5 million to start looking once again for new homes.

“Last weekend,” said Steward, “there was a dramatic increase in visitors to our show houses. Four APKF properties in Mowbray and Rondebosch attracted over 60 groups or couples of potential buyers.”

Like most other agency spokespeople, said Steward, she sees the really serious bottleneck in the housing sector now being at the banks.

“If the banks could now change their attitude and not require such high deposits,” said Steward, “and if the Reserve Bank could go the whole way and give us a further 2% interest rate drop, we would be back into a “normal” residential market which, in turn, would be a big help to the economy.”

Article from: www.anneporter.co.za