Western Cape Chairman of IEASA "regrets lack of boldness" shown by SA Reserve Bank's decision to hold repo rate at current level
Breaking ranks with the majority of commentators who have given the thumbs up to the S A Reserve Banks October 22nd decision to hold the repo rate at its current level, Ivan Neethling, Chairman of the Western Cape branch of the Institute of Estate Agents, said this week that he would have welcomed a further 0,5% to 1,5% drop in the rate.
A big recovery in the Western Cape housing market was predicted for the fourth quarter of this year, but, despite bullish reports from some agencies, this has not been evident overall. We have had considerable talk about the bottoming out of prices and there is evidence of this, but as yet we are not seeing the big increases in home sales, particularly at the lower end of the market, where the government repeatedly says it wishes to encourage homeownership.
The latest data from the United Sates (where over 14 million homes are now vacant and where unemployment stands at 8,5%) coupled to the depressing news that in South Africa liquidations and judgments increased by some 16% in August, does not, said Neethling, point to the recovery as being as imminent as many suppose.
For some 18 months now many businesses, including banks, property developers and property marketers, have been cutting back on overheads and staff and using capital to keep going. As yet the turnaround is still not widespread and to date the improvement in the housing sector, although a reality, has not yet gained momentum.
Neethling said, as he has done previously, that he sides with those economic commentators who regret the step-by-step cautious approach by the government on economic matters.
What is needed is a really aggressive action to stimulate the economy as a whole and the affordable housing sector in particular, said Neethling. In addition to a further 1,5% drop in the interest rates, I, and others with the same mindset, would like to see major investment incentives and tax rebates brought in to stimulate economic growth.
Right now, the likelihood of South Africa having to fund 45% in Eskom tariffs over the next three years and the consequent rise in the inflation rate appear to dominate all economic policy. In my view, however, the only solution to this problem is to grow the GDP far faster than is currently happening.
Neethling said that two million people in South Africa are still in the queue for affordable housing.
If we could get the supply chain moving here that would be the first step to a real economic recovery.
Article by: www.startprop.co.za