Agent claim current interest rates are not historically high
News > news - 31 Mar 2008
A study of South African interest rate fluctuations from 1986 to the present day - a period of some 21 years - should give some serious perspective to the current market conditions, say Gideon Hanekom and Nolan Allnutt, the new Anne Porter Knight Frank agents for Kirstenhof and Tokai.

In particular they believe the patterns should “boost confidence in property among the more timid buyers and knock out some of the wild talk and pessimism currently being experienced in the residential property sector.”

The two have produced a graph, which clearly shows that the current interest rate level of 14,5% is lower than South Africa has had for 14 of the last 21 years. But for all except two of those 21 years, sales countrywide had been satisfactory. It was only in the 1997/1998 period that sales actually tapered off markedly.

Throughout the period from 1987 to 1993, says Allnutt, a period which is often referred to because throughout that time interest rates remained very steady, the rates had in fact been some 1,5% higher than they are now.

“What this graph is telling us,” said Allnutt, “is that now is a good time to buy because, firstly, the rates are not excessive and, secondly, after possible further 0,5% or even 1% rises later year the rates are almost certain to go into a decline, which will be very beneficial to the housing market. Some economists are predicting as much as a 2% to 2,5% decline by the middle of 2010.”

“Interest rates go through periods of “natural” cycling as can be seen on the graph from 1994 to the present, with three clearly visible cycles. If a straight line is superimposed on these cycles, it clearly reveals a downward trend in the overall interest rate. This is something to keep in mind.”

Referring to recent Standard Bank figures, Hanekom said that a 9% to 11% price growth had been the average in the South African housing market over the last 30 years and this, he said, is a satisfactory return “however it is measured.”

In the suburbs they serve, Hanekom said, demand and price increases continued to be above average due to the shortage of land and the high number of people using the suburbs as the ideal stepping up into the middle and upper middle price categories.

* Graph shows that interest rates go through periods of “natural” cycling as can be seen on from 1994 to the present, with three clearly visible cycles. If a straight line is superimposed on these cycles, it clearly reveals a downward trend in the overall interest rate.
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