While no
surprise in view of the better than expected April inflation rate of 4.5%
(against a predicted 4.7%), the decision by the Reserve Bank’s Monetary Policy
Committee is nonetheless great news, especially for first-time home buyers.
Homeowners and those planning on buying property can breathe a sigh of relief at today’s decision to leave the interest rates the same.That is
the word from Samuel Seeff, chairman of the Seeff property group, who says keeping
the interest rate at what remains a five-decade historic low of 5.75% (base
home loan rate of 9.25%) has been an important driver of the growth in the
housing market.
There can
be little doubt that first-time home buying has improved over the last two
years with this demographic now accounting for about a quarter of all home
buying nationally, he says. The oil-price bonus and resultant lower inflation
outlook early this year provided an added boost for this sector as has the raising
of the transfer duty exemption level by government to R750 000.
The
improved mortgage lending landscape too has greatly aided first-time buying, says
Seeff. According to Ooba’s latest barometer, it now sees a home loan
application success rate of over 75%, about 50% of which are first-time
applicants.
Seeff
says that while the banks have started signalling warnings of a slowdown of the
buoyant buying activity that has characterised the market over the last two
years, word on the ground remains one of good demand and stock shortages.
We are
still seeing a well-balanced market with plenty of activity. Three to five
years ago, sellers still had to settle for on average 20-30% below their asking
prices and properties were taking on average five months to sell. Now, we are
seeing properties selling almost as fast as they are hitting the market and in
many areas up to 40% at close to or full asking price, says Seeff.
It is
still a positive phase with good selling conditions across most areas, he adds.
House price growth remains positive at about 2%-plus above inflation on
average. The high demand areas, especially the more affordable sector below
R800 000 is seeing excellent price growth and, in some areas property
values are now 30-40% higher than five years ago.
While it
is safe to say that this will be a year of mediocre economic performance, Seeff
believes that the property market will retain is lustre. Buyers will continue
taking advantage of the favourable conditions and those looking to sell should
still do so.
There is
no doubt though that the challenges for consumers are mounting and, as noted in
the April Consumer Price Index, inflation is again accelerating. Seeff says
that this means that the risk of an interest rate hike towards the latter part
of this year therefore remains. Buyers should be aware of this and ensure they
plan adequately.
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