Further evidence that interest rate hikes unlikely to reduce residential home sales

A month on month 32% rise in the Rawson Property Group’s recent Western Cape residential sales appears to corroborate a prediction made several weeks ago by Wayne Albutt, Regional Sales Manager for the Rawson Property Group in the Western Cape.

In his earlier statement, Albutt said that the recent rise in the interest rate, although hardly welcome, will almost certainly not result in reduced sales.

His reasoning is based on 16 years of property marketing experience which, he said, had taught him that the crucial factor in home sales is not interest rates but the general state of the economy and the public’s perception of it along with the associated disposable income of the average individual.

“Recent reports,” said Albutt, “indicate that an overall drop in disposable income of 4 or 5% in one year has taken place. However, in home sales this is compensated for by the countrywide increase of incomes in the lower middle group, a spinoff of which is that there has been a marked increase in demand for home ownership at the lower levels. These and other factors lead me to think that the Rawson Property Group Western Cape’s improved sales will be maintained throughout this year.”

Asked if further interest rate rises might not affect sales, Albutt said that the general opinion in the market now is that rates will not be raised by more than 1% in the next six to nine months and by no more than 1,5% before the end of the first quarter of 2015. Rises of this size, he said, are endurable and the market will be able to accept them.

Albutt drew attention to a recent statement of Brian Kantor, Chief Economist and Investment Strategist at Investec, who has opposed any further interest hikes on the ground that they will weaken South Africa’s domestic economy which accounts for 60% of our GDP at any one time. Increased growth, he said, should be the country’s primary objective and this necessitates low interest rates.

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