South Africa

A missed opportunity for greater property price appreciation

The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has again announced that interest rates will remain stable, keeping the repo rate at 3.5 percent and the prime lending rate at 7 percent.

House price appreciation and rental escalations have remained subdued for some time now; enough that an interest rate cut at this meeting could have helped stimulate further growth within the local property market.

The Q4 2020 RE/MAX National Housing Report reveal that, for the fourth consecutive quarter, the median asking price of sectional titles have dropped y-o-y, shrinking by 3 percent when compared to Q4 2019. The average active listing price on remax.co.za also dropped by 13 percent y-o-y. The only segment the showed growth was the median asking price of freehold properties which grew by 5 percent y-o-y.

Although the property market is very much active at this time, many buyers and sellers are struggling to make ends meet within the current economy, which puts downward pressure on asking prices. An interest rate cut could have helped alleviate some of this financial pressure, allowing room for property prices to strengthen.

While it is unlikely that we shall see interest rates climb this year, homeowners should leave room in their budget for a possible increase of around 0.5 points during the course of 2021.

While it is possible that interest rates may drop further during the course of the year in response to the ever-evolving circumstances surrounding the pandemic, it is always advisable for homeowners to make provision for the possibility of a minor increase, as this will directly affect the repayments on their home loan.

It remains unlikely that interest rates will return to their previous levels of around 10% within the near future. I therefore encourage buyers to make the most of the current market conditions before things change.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa

BUSINESS REPORT

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