Knysna-Plett Herald | Steady repo rate welcomed by Seeff

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Steady repo rate welcomed by Seeff
10:30 (GMT+2), Fri, 25 May 2012

PROPERTY NEWS - The decision by the Reserve Bank’s Monetary Policy Committee to retain the repo rate at its current level of 5,5 percent is welcome news for the stability of the property market, says Seeff chairman, Samuel Seeff.

After a somewhat pedestrian pace in market activity last year, this year seems to be off to a positive start and we are encouraged by reports of sales growth from the large agencies and our own 27 percent growth for the year up to April. While this growth is largely due to market share gains rather than any real uptick in market activity, we are nonetheless cautiously optimistic that there is some stability in the market.

The marginal easing of the lending criteria on the part of banks has also led to more transactions being approved, but we are nowhere near the transaction volumes that would be viewed as normal market activity. The volume of urgent sale stock also continues to impede both normal buyer demand and prices, he says. Only once there is a substantial clearance of this stock out of the market can we return to normal market activity without outside influence to hold back prices.

For now though, it remains vital for sellers to price conservatively and in line with what buyers are prepared to pay. Where we have seen sellers heeding the advice of real estate professionals and pricing correctly, properties are selling, not only in the sub R1,5 million market, but also in the upper end of the market.

Market conditions continue to favour of buyers, but we anticipate that this balance will start to shift as we enter 2013. The stable repo rate provides a welcome boost for buyer confidence and buyers looking to secure good value should take advantage while they can, but should do their homework and buy smart.

Investors looking to make a profit will have to wait out the year to see how the market unfolds, he says. If the bulk of the urgent stock is cleared, the economy remains steady and the interest rate holds at a low level, then we could look forward to some real strength returning to the market towards the end of the year.

As more buyers enter the market, competition will increase and consequently prices. We should then start seeing a return to normal market conditions by early 2014. This however, remains dependant on macro-economic factors including economic and job growth. The prolonged Euro-zone crisis and news that the UK is back in recession also remain worrying factors on the horizon. Although the fuel price is set to reduce during the coming month, the ongoing middle-eastern political crisis is likely to continue to put pressure on fuel prices with a knock-on effect on inflation, he adds.

A low interest rate used to be the core driver of market activity, but our experience over the past two years has been that it has done little to stimulate significant buyer activity. Yet, any indication of an increase is likely to negatively impact the already low demand. A steady repo rate is therefore vital to maintain stability in the market, necessary to pave the way to a real recovery.

Courtesy of Seeff.