Rates reactions - Andrew Golding Pam Golding Property Group
Today's decision by the Monetary Policy Committee to raise the repo rate by 50 basis points is regretted by Andrew Golding, CE of the Pam Golding Property Group, who believes it will undoubtedly exert further pressure on consumers whose disposable income is already being eroded by rapidly rising fuel and food costs as well as proposed significant hikes in electricity tariffs.
From a residential property market perspective Golding says the higher interest rates will once again see the lower and middle sectors bearing the brunt of this increase which will serve to slow the market even further.
However, we perhaps tend to forget that the residential property market is cyclical and that we have experienced boom times for a considerable period of time. From a global perspective we need to take comfort in the fact that we are not faced with a sub-prime housing situation like the United States and when compared internationally our house prices are still relatively low.
In a dynamic economy such as ours there is always movement of people and those who require houses, plus there is still a pent-up demand for homes particularly among black buyers.
Golding says the recently announced growth in employment is a positive factor that should impacts favourable on the demand for homes. There are those being transferred on business, new contract professionals moving in and as a result not only those seeking to purchase homes but also homes to rent - the latter being a sector of the market currently experiencing growth.
He points out that one aspect of the higher interest rates and the electricity shortage is that it has resulted in the curtailment of development of homes to a large degree, a factor, which will put pressure on the supply of houses and could bolster residential property values.
We should not lose sight of the fact that residential property ie solid bricks and mortar remains a sound long-term investment. Hopefully we will see a flat trend in regard to interest rates for the remainder of 2008.
However, homeowners who are hard-pressed in terms of making their monthly repayments are urged to do their utmost to ensure that they retain what for most people is their greatest asset and one which will over the medium to long term continue to appreciate in value. While amid the current scenario belt-tightening and the reduction of expenditure wherever possible is inevitable, retaining one's home is a key imperative.
Financial institutions are approachable in regard to restructuring instalments over a longer period of time in order to reduce the monthly repayment amount, and other such measures. Those who are considering purchasing property are encouraged to focus on properties within their affordable price range and not over-extend themselves in credit.
Article by: www.pamgolding.co.za