PROPERTY NEWS - While the decision to hike the repo rate by 75 basis points to 5,5% (prime rate to 9%) is somewhat of a shock, a steeper hike was expected by the property market.
Samuel Seeff, chairman of the Seeff Property Group, says while it impacts the cost of mortgages and debt, it is not likely to affect the underlying demand in the market.
The reality is that the weaker rand and inflation spike to 7,4% (highest since the 2009 GFC), has accelerated rate increases. We are likely to see more aggressive hikes in September and November with the prime rate back to the pre-pandemic level of 10% by January 2023, if not sooner.
Although homeowners and buyers need to adjust to the higher costs, Seeff expects the property market to remain resilient.
He further says that while the SARB is understandably faced with a difficult task and the rate hike may support the currency, this alone will not turn the tide.
The high inflation is not because of higher consumer spending, but external factors such as fuel and food hikes which, with the rate hike, is a double whammy for consumers who must carry the costs.
The economy must grow as a matter of urgency. Increasing the interest rate is an impediment to growth and the SARB must keep rate hikes to a minimum and avoid rate shocks, which could be disastrous at a time when the economy is facing significant challenges.
Even with the hikes, Seeff notes that the interest rate remains favourable for the market. Mortgage lending remains strong with better rates, lower deposit requirements and up to 100% bonds for first homebuyers - still the best conditions for buyers since the introduction of the National Credit Act in 2007.
While sellers need to be mindful of the pressure on asking prices in view of the weakened price growth, there are still opportunities to sell. The flat price growth is not just good news for buyers, but also protects the market against a bubble forming and the potential of high distress levels.
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