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Rates decision - Property experts comments

The Monetary Policy Committee (MPC) announced yesterday at its third meeting of the year that interest rates will remain unchanged - we take a look at some of the thoughts from property industry leaders on this decision.
 
The rates have stayed at their current figures for well over a year now, having been raised in March last year. Reserve Bank Governor, Lesetja Kganyago, said earlier in the year that the key to keeping interest rates low is to bring inflation down. For the first time since August last year, inflation fell within the target rate of between 3% and 6% last month. The consumer price index (CPI) eased to 5.3% in April, down from the 6.1% in seen March.
 
Herschel Jawitz, CEO of Jawitz Properties said that it was a fantastic opportunity for the Reserve Bank to make a definitive move in the face of declining inflation and a slowing economy to cut interest rates by at least 50 basis points. Adding that due to the uncertainty caused by possible further ratings downgrades and our weakened currency have prevented this. 

Jawitz also said that aside from the positive financial impact of a rate cut on home ownership and affordability, the impact of heightened consumer confidence would have had an equally positive impact on the residential property market. “If consumers feel more confident, they will make longer term spending decisions, of which buying a home is one of the biggest.”
 
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that while many cash-strapped households would have been happy to see the rates cut, there are still benefits to a stable interest rate. “With the country currently in the midst of economic instability, households should see the stable rates as an opportunity to get their finances in order and build up cash reserves where possible. While building financial reserves may be easier said than done with the cost of living increasing consistently, it is advisable for consumers to use this time to cut back on unnecessary spending and put money aside,” he says.
 
According to Goslett, the stable interest rate will assist potential homebuyers to assess their affordability levels and financial readiness to the enter the property market. “It is fair to say that the interest rates will probably stay where they are for the remainder of the year, with a possible cut next year.  The steady rates, along with the recent change in the transfer duty exemption to R900 000 should act as a catalyst in boosting the property market within the affordable housing sector – a sector that already outperforms all other sectors,” says Goslett.
 
He adds that 56.36% of properties sold during the first quarter of this year were priced at R800 000 or below. “The statistics bring to light the high demand for housing within the more affordable pricing brackets,” Goslett concludes. 
 



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