Rates reactions - Jeanne van Jaarsveldt RE/MAX

Today’s repo rate increase of 50 base points will further trim the already shrinkage in the volume of residential property sales, but its impact would again be cushioned, just as the earlier increases had been absorbed to some degree, by sellers lowering their expectations on asking price.

More important to Jeanne van Jaarsveldt, marketing and finance director of RE/MAX of Southern Africa, was the effect the hike would have on residential rentals as he was in little doubt the rise would be flashed onto tenants.

He believed the lower end of the city’s rental markets was approaching a crisis level. “Stock is there, but because of the surge in numbers of failed credit checks landlords are insisting on double deposits to safeguard their investments and higher rentals to offset higher mortgage repayments.”

The eighth interest rate increase in a period of less than two years had also flattened landlord’s ability to negotiate on rentals, which was one of the traditional safeguards offered them in a rising interest rate scenario. “Worse still, the current grimness of the rental market will intensify further with the full impact of the new municipal rates structures, which will inevitably be passed onto tenants.

A solution in part, and one that Van Jaarsveldt views as an imperative, was for the real estate industry stakeholders to create a developer friendly environment to stimulate the flow of specifically built rental stock. This would free up the situation, while at the same time boost job opportunity and introduce some level of stability into the rental market.

Van Jaarsveldt says the effect of today’s increase will put a further dampener on a stressed residential property market. However, he takes some comfort from the fact that the increase will be cushioned by sellers greater awareness of buyers risk appetite becoming even more acute in terms of servicing their monthly financial commitments.

“The key in sustaining a sound flow in property transactions is for sellers to price their properties relevant to today’s market conditions.”

Article from: www.remax.co.za