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No Further Increase of Repo Rate Yet

The Reserve Bank’s Monetary Policy Committee met on Thursday and analysts’ predictions that it wouldn’t raise the Repo Rate have proven accurate. The rate has been increased twice this year and currently stands at 5.57% and John Loos, FNB Household and Property Sector Analyst, forecasting that the MPC will likely only recommence with moderate hikes in 2015.
 
Bruce Swain, MD of Leapfrog Property Group concurs with this view stating that “the MPC has been quite conservative when it comes to raising the repo rate and so it comes as no surprise that they’ve elected to maintain the rate at its current level. Barring unforeseen circumstances we certainly don’t expect it to go up again in 2014.”  
 
Could the hiking of interest rates be good for property?
 
Loos believes that the current slow hiking is having a positive effect on the property market saying that “while the housing market is not necessarily the SARB’s primary focus, it so happens that its SARB approach of gradual “normalization” (meaning “hiking”) of interest rates is exactly what the “doctor ordered” in order to keep the market “well-behaved”. Had it not started interest rate hiking this year, the market may have just started to go crazy.”
 
Swain believes that the previous increases in the repo rate haven’t harmed the residential property market but that it has made buyers slightly more cautious. “Buying a property is always a big financial commitment and we’ve repeatedly cautioned against making an offer to purchase without having taken costs such as municipal rates and increases in the repo rate into account.”
 
That being said Bruce believes that the market still has much to offer and that while home buyers should be cautious, they by no means need to refrain from buying; “the residential property market growth has been slow but steady and buyers needn’t worry about another ‘bubble’ pricing them out of the market. I’d advise people to do their homework, make sure they can afford the purchase (having taken next year’s interest rate hikes into account) and then, by all means, to buy.”


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