Property market still favourable for buyers

Consumers are able to enjoy the current interest rate for a while longer, as Reserve Bank Governor, Gill Marcus, announced yesterday at the third Monetary Policy Committee meeting of the year that the prime interest rate would remain at its current 9%. The repurchase rate will remain at 5.5%. 

While this will come as a relief to consumers, economists are still expecting the rate to be hiked throughout the remainder of 2014, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
“Unfortunately with the weakness in the currency and inflation pressure, the Reserve Bank will have little choice but to raise the interest rates in the near future,” says Goslett. “The Reserve Bank Governor has made it clear that consumers should expect to see rate hikes in possible varying increments during the remainder of the year.”
He notes that it is likely that these future rate hikes will have an effect on the property market to a degree, considering that most aspirant homeowners will require finance to purchase a property. “The increased cost of credit could hold some buyers back a while longer, however there is a strong indication in the market that consumers are confident in the property market and are eager to get their foot in the door. Currently property sales are still performing well with demand outstripping supply in many regions throughout the country, proving that South Africans still value homeownership.”
Even though house prices are only seeing marginal gains this year, Goslett says that even a small value increase points to a more stabilised environment than we were experiencing a few years ago. “Property price growth is important for those who currently own property; however property remaining within an affordable range is equally important for potential first-time buyers.”
According to Goslett current interest rates are still highly favourable for buyers and will only make a noticeable impact on the market if they are raised significantly. He notes that affordability levels are of greater concern for the future of the property market. “While future rate hikes are likely to place more pressure on buyers, reducing debt levels will increase the applicant’s chances of bond approval and make affording a home far easier.”

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