Drop in Interest Rates Welcomed

Category Finance

“The property industry welcomes the announcement by the Monitoring Policy Committee (MPC) on Wednesday 28 March 2018, to cut the repo rate by 25 basis points to 6.5%”, says Bryan Biehler, Managing Director of Huizemark Property Group

The prime lending rate of banks is now 10%. This being the interest rate charged by banks to consumers. This will certainly assist consumers who are currently saddled with the 1% increase in VAT and the increased utility costs, based on the recent municipal property valuations.

We expect this interest rate decrease, along with some recent improved economic growth, to assist in driving mildly stronger residential demand, lifting average house price growth during 2018 closer to the 5% mark, up from the low average price growth of 3.8% in 2017. Interest rate decreases do have a positive impact on the household sector debt-to-disposable income ratio, which has been trending downwards since 2008.

“Biehler’s views on the rest of 2018”:

“If we have decisive government action and direction, greater economic stability and a more interest rate cuts this year, it sould further boost consumer confidence and housing demand. A stronger Rand also influences public perception of improving economic conditions which boosts Buyer activity and housing demand.

This needs to be viewed as a short-term perspective, based on a number of uncertainties, including “responsible political electioneering” leading up to the 2019 elections.

Even a small decrease in the interest rate is positive and may marginally stimulate the economy. Consumers are still burdened with a high-level of indebtedness, a low savings base and increasing costs of living”  

The biggest impact on prices should be evident in properties priced between R500 000 and R2 million where demand should escalate based on increased affordability. When setting the marketing price, Sellers should be mindful of property prices, demand and trends in their area. Engaging the services of a professional estate agent specialising in the area, is vital when selling your property.

-Property correspondent

Author: Bryan Biehler

Submitted 29 Mar 18 / Views 1347