The South African Reserve Bank last Thursday increased
its repo rate from 7,5 to 8 percent (prime from 11,5 to 12 percent).
This was the third increase so far this year with 50 percentage basis
point rises in June and August. Property experts reaction was
generally positive with wide consensus that high anticipatory levels
of the rise had already been factored in by homebuyers.
Here are their immediate comments:
Russell Scorer, managing director of Maxprop
"I am still bullish that the property market will not be negatively
affected in the long term by the 50 points increase announced. There
will be a short term negative effect as people take a breath and analyse
the way forward, however, people have short memories so after a brief
levelling off of the market we expect sales to continue."
"The residential market will be affected more than the commercial
and industrial market as C&I investors plan and strategise their
funding according to projected cash flow after expenses including interest."
Samuel Seeff, Chairman of Seeff Property Services:
This increase is in line with Governor Tito Mbowenis plans
to increase the interest rate at a reasonable but continuous pace. The
upward movement will have and has already had an impact on the market,
but the increase has already been factored into the market - buyers
expect it and have factored it in to their purchasing plans.
I dont expect this increase to have any particular impact
on the market, and nor do I expect that a further 0,5% increase in December
if indeed there is one will have a major impact. However,
if the rate continues to rise thereafter, it will have repercussions.
Bill Rawson, Chairman of Rawson Properties
The Residential property will not be fazed by the 0,5% increase.
It is widely agreed that this rise was essential as spending has been
excessive. It is also agreed that a further rise will be necessary possibly
as soon as December. The question now being asked is, when will further
increases no longer be necessary, i.e. when will the current cycle peak?
Barry Davies, CEO of Chas Everitt Franchising
Homeowners will be breathing a sigh of relief at the increase
being limited to 0,5 percent. This means that the repayments on existing
home loans will rise by only R34 per R100 000 borrowed. However, sellers
need to bear in mind that this is the third increase this year, and
take the new bond qualification levels into account when setting an
"At the beginning of the year a R800 000 loan required the buyer
to earn around R26 500 a month. Now, with interest up by 150 basis points,
the buyer must earn R29 000 a month to buy the same house.
John Loos, property strategist: FNB Commercial Banking:
Undoubtedly, the rate hike is negative for property, but is not expected
to be the cause of any property trend changes. This is because the residential
property market and its building activity turned weaker a considerable
time ago, and I had expected retail property to cool off regardless
of rate hiking. The strong industrial and office markets on the other
hand will probably be driven by stronger forces in the form of a combination
of solid demand growth and a scarcity of vacant space, and I expect
these property categories to by-and-large shrug off the current round
of rate hiking, and continue to show solid returns.
Dr Andrew Golding CE of The Pam Golding Property Group
While the increase is unfortunate, it was not unexpected and home
owners are urged to take comfort that SA continues to enjoy a stable
and sound economy with still historically low interest rates.
While house price growth has slowed to more realistic and sustainable
levels, as an asset class residential property should be viewed as a
medium to long-term investment. Budgeting for possible further - and
we anticipate moderate - interest rate increases is essential and controlling
household debt is important. Those who receive year-end bonuses should
consider utilising this or a portion thereof in order to reduce
Herschel Jawitz , CE Jawitz Properties
The half percent increase has been expected for some time and
will have little, if any, sudden impact on the residential market. Consistency
of policy from the Reserve Bank will give buyers re-assurance in terms
of future predictability. We should however, continue to see the trend
of a slowdown in the rate at which house prices are rising as a result
of the rate increase. The increase will also continue to put more pressure
on estate agencies as the market continues to tighten with record number
of estate agencies and agents competing in the market.
Dave Rogers, MD of Homenet.
The spring-into-summer home sales surge that usually occurs at
this time of year will be dampened by the rise. The fact that it was
only 50 basis points is a relief and the market will also be steadied
to some extent by the obligatory moves that also traditionally take
place at year-end (when people are transferred, for example) but the
hike will undoubtedly extend the levelling off in the market that we
have been experiencing for some months."
Jo Pelser, MD of Sable Homes
The interest rate increase, while more moderate than expected,
will obviously make all homes less affordable, forcing would-be buyers
to either withdraw from the market or scale down their requirements.
"When it comes to new residential developments, though, the concern
is that home prices will be even higher next year because building costs
are still rising so rapidly. Thus buyers who want a new home generally
will have no choice but to go smaller.
This will naturally increase the demand for smaller units, which should
benefit developers, but the boost will not be immediate. It takes time
for buyers to adjust to the idea of a smaller home, and also for developers
to shift gear and start delivering smaller units."