CURRENT SOUTH AFRICAN INTEREST RATES ARE IN THE BOTTOM ONE-THIRD BRACKET OF THE LAST 21 YEARS

Gideon Hanekom and Nolan Allnutt, the new Anne Porter Knight Frank agents for Kirstenhof, Tokai and surrounds, have compiled a graph showing interest rate fluctuations from1986 to the present day - a period of some 21 years.

“A study of this graph,” said Allnutt recently, “should boost confidence among the more timid buyers and knock out some of the wild talk and pessimism that is currently being experienced in the residential property sector.”

The graph, he said, shows clearly that the current interest rate level of 14,5% is lower than South Africa has had for 14 of the last 21 years. But for all except two of those 21 years, sales countrywide had been satisfactory. It was only in the 1997/1998 period, he said, that sales actually tapered off markedly.

Throughout the period from 1987 to 1993, added Allnutt, a period which is often harked back to because throughout that time interest rates remained very steady, the rates had in fact been some 1,5% higher than they are now.

“What this graph is telling us,” said Allnutt, “is that now is a good time to buy because, firstly, the rates are not excessive and, secondly, after possible further 0,5% or even 1% rises later year the rates are almost certain to go into a decline, which will be very beneficial to the housing market. Some economists are predicting as much as a 2% to 2,5% decline by the middle of 2010.”

“Interest rates go through periods of “natural” cycling as can be seen on the graph from 1994 to the present, with three clearly visible cycles. If a straight line is superimposed on these cycles, it clearly reveals a downward trend in the overall interest rate. This is something to keep in mind.”

Referring to certain Standard Bank figures, Hanekom said that a 9% to 11% price growth had been the average in the South African housing market over the last 30 years and this, he said, is a satisfactory return “however you measure it”.

In the territories that they serve, said Hanekom, demand and price increases continue to be above average because land remains in short supply and so many people see these suburbs as the ideal stepping up area to take them into the middle and upper middle categories.

Article by: www.anneporter.co.za