SAR Bank interest rate decision marks the start of better times

Thursday’s decision by the SA Reserve Bank to hold interest rates at their current levels will be seen in the property market as the turning point at which trading conditions could begin to improve, says Rob Lawrence, a business development manager at Rawson Properties.

“In my view,” said Lawrence, “the market had already begun to bottom out before this announcement. Attendance at Rawson show houses the last few weekends has been excellent and the number of telephonic and email enquiries was higher than it has been for at least nine months.”

Certain franchises in his territory, said Lawrence, had in July recorded their best sales in a long while.

“Market watchers,” said Lawrence, are now confident that there will be no further interest rate rises. This, therefore, is the beginning of the stabilisation period which we have all been predicting had to come soon.”

Factors which had influenced the SAR Bank’s decision, said Lawrence, were the drop in oil prices, the firming of the rand, the improvement in the foreign debt situation and the fact that Eskom seems to have got a handle on the power situation. All of these, he said, would make inflation easier to control, with the result that further inflation reduction measures (i.e. interest rate rises) are now unlikely.

To paraphrase Winston Churchill, this might not be the beginning of the end of the market correction, but it is likely that it is the end of the beginning.

In the circumstances, added Lawrence, FNB’s much criticised decision to review approved home loans on which transfer has not yet been given may prove premature.

“One has to appreciate,” he said, “that under the National Credit Act rulings banks are in a tricky moral situation: if they use the exit clause to get out of their agreement they are accused of letting down buyers and developers, some of whose projects have only just made it to the required pre-sales level. On the other hand, if it can be shown that they lent money without adequate supporting evidence they can be sued by the bondholder or others affected, for reckless lending.

Lawrence added that right now shrewd buyers are picking up good value properties at 20 to 25% less than they would have paid a year ago because serious sellers, he said, have at last come to terms with the realities of the downturn.

“A Wynberg cottage sold by Rawsons for R675 000 could a year ago have gone for R850 000 – but buyers should not expect such bargains to be around for more than another few months.”

Article by: www.rawsonproperties.com