Anticipated impact on house prices expected to be minimal

On Thursday this week, SAPA reported that the prime interest rate is to rise to 11.5 percent after the SA Reserve Bank opted on Thursday to hike the repo rate, at which it lends money to commercial banks, to eight percent.

Tony Ketcher, managing director of Seeff Properties Randburg says that recently released inflation figures were 4.8% while the target of the Reserve Bank was between 3% and 6% - so it was on the upper side of halfway. “Given increases in producer price inflation and the oil price, the hike in interest rates is not unexpected, and in itself is not a bad thing,” he said.

What impact is this interest rate increase going to have? “The issue here is confidence and sentiment in the market, which hinges on the direction that Governor Mboweni gives. Can we expect further rate increases or is this, ideally, the most we are facing? Perceptions of the answer to this will impact on where we see the market going and related activity. In summary, I think that perceptions will be that buyers will expect sellers to come down in price and will wait, or will offer lower prices. However, sellers who can manage the increase in payments will hang on to their properties without dropping their prices. In other words, we are not actually going to see the decrease in prices that many might be expecting to happen. If this trend does eventually start to happen, it will take a while to filter through,” says Samuel Seeff, CEO of the Seeff Group

“There will be a market this month and the next, and the one thereafter – notwithstanding the interest rate increase. The market will hot up again in October and November, in line with normal seasonal trends. In terms of this and other potential increases, the differential between what a person would be paying back on a mortgage at 10,5% before the two recent interest rate increases, compared to 11.5% now, is an increase of just under 10%. While this is significant – it is not enough to frighten buyers off,” says Ketcher.

Founded in 1964, Seeff Properties is one of South Africa’s largest independent real estate companies. Seeff Properties Randburg’s 50 agents sell properties in the northwestern areas of Johannesburg. For more information please contact the Managing Director, Tony Ketcher on 4763536 (office) 083 307 8083 (cell).