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Interest rate stability a vital boost as housing market starts to rebound

With the housing market in a much healthier position than what it has been in years, there is every reason to believe that it is poised for a rebound, says Seeff chairman, Samuel Seeff. 

This coupled with the recent announcement that the repo rate will remain at 5,5% is just the boost the market needs as it gains momentum. 

Seeff however, has also reacted to what he regards as too much uncertainty around the economy and in particular where interest rates are heading. In the lead up to the MPC meeting, the economists were divided and that is not a good thing, he says. The South African Reserve Bank should do more to instil certainty, vital for both investor confidence and the housing market.

If interest rates are set to go up in the near term, a more decisive indication in terms of the range and probable time frame is imperative. Households need to be able to plan and given that the interest rate is such a vital driver of demand, real estate needs a sense of the potential impact if the market is to progress meaningfully, says Seeff.

Having said this, the 50-basis point hike in January has not diluted buyer interest and the market is still very active and we anticipate this to continue on the back of the positive news around the interest rate. In the high-demand metro areas demand is beginning to outstrip supply. Prices are firming and we could start seeing a gradual upward movement over next few months. This gives us every confidence that we are heading towards an upward trajectory but, certainty remains necessary.

Buyers are talking with their feet, says Seeff. Show house attendance is at almost unprecedented levels and multiple offers are becoming more prevalent. It is a good time to invest in property. There has been no significant capital appreciation over the last few years, but if this upward trend persists, time could be running out for those still looking to secure good value. Buyers that require bonded finance though, would need to allow for interest and cost hikes given the economic and interest rate uncertainty.

Conversely, sellers should note that correctly priced property will sell. There is no shortage of buyers and stock shortages are now a challenge almost across the board in the metros. This signals a good phase for those looking to sell and possibly in turn take advantage of the still favourable buying conditions.

In terms of where the market is headed, Seeff says that within the South African context, the interest rate, even having regard to moderate hikes, is still relatively low. While any further rate hikes will no doubt impact the affordability of housing and debt servicing costs for bond holders, we are still in a better position than in previous decades.

We should also take encouragement from the improvement in the US, UK and European economies. The shift in trade of course now means that we are particularly interested in what is happening in China and other emerging markets, all of which seem to be somewhat straddled right now. That notwithstanding, South Africa's housing market is in a relatively healthy place, he concludes


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