Repo rate decision “disappointing” 

The Reserve Bank’s decision to leave the repo rate unchanged at 5.5% is “a little disappointing” says Bryan Biehler, MD of the Huizemark property group.

Factors such as consumer inflation which rose slower than expected, slightly improved retail sales growth and the recent sharp downturn in the rand all played a role in the Monetary Policy Committee’s decision to leave the repo rate unchanged.   

“Although not entirely unexpected, we feel that an opportunity for a mild property market boost has been missed. To be blunt, the property market is flat right now and a slight cut in the repo rate would have done much to improve sentiment.

“There has been a distinct decline in activity over the past 24 months; the majority of sellers have dropped their prices by as much as 20% and the marketing period of homes has increased from four months to between six and nine months. High debt ratios, increasing living costs and the renewed possibility of a double-dip recession in America and Europe are also taking their toll.”

Analysts remark that monetary policy is already accommodative and rates are likely to remain stable for some time. The Reserve Bank’s official repo rate has been at a 30 year low of 5.5% since November 2010, after retreating from a peak of 12% in December 2008.

“Negativity aside, the fact that the repo rate has remained stable is good news for buyers applying for bonds. Buyers can take their pick of properties right now and they should take advantage of the situation as it won’t stay that way forever.”

Biehler adds that from an emerging market perspective, South Africa can be grateful for the sound financial policies which have been implemented by government over the past few years as these have protected the country from the worst of the global economic fallout and will no doubt continue to shield the country going forward to a large extent.