The Reserve Bank’s Monetary Policy Committee (MPC) will announce the decision on interest rates on Thursday.
The rate was cut by 50 basis points to 5.5 percent in November 2010. This was the lowest reading in almost 30 years.
Speaking to Property24 ahead of the MPC announcement, Kura Chihota, managing director at Leapfrog Property Group said they expect interest rates to remain unchanged.
“Consumers are not actively buying at the moment, an increase in interest rates will be wholly inappropriate at this stage,” said Chihota.
James Templeton, chief executive officer of Emira Property Fund said they do not think interest rates will have much of an impact on listed property at all.
“It seems as if, although inflation is rising somewhat, the expectations for interest rates increases have been pushed out due to sluggish economic growth,” said Templeton.
He added that lower interest rates in the long run bode well for property but the slower economic growth is hurting listed property in respect of vacancies and arrears.
Economists who spoke to I-Net Bridge following the release of the Consumer Price Inflation (CPI) felt that the repo rate will remain unchanged.
According to Stats SA, the CPI rose to five percent in June year-on-year. The CPI is used by the Reserve Bank for its inflation target.
Chris Hart, economist for Investment Solutions told Property24 that the rand is an indicator of whether there will be a hike in interest rates or not.
He said a stronger rand means no hikes but a weaker rand will mean a hike in interest rates, which will put pressure on the consumer already battling to keep up with their monthly bills.
Nedbank economic unit said: “We still expect the MPC to maintain its wait-and-see policy until there is greater evidence of more generalised inflation. “We would expect the Reserve Bank to delay its first hike until early 2012 as an early interest rate increase would risk curbing the economic recovery.”
“A premature interest rate will undermine confidence in the already shaky real estate market,” said Samuel Seeff, Seeff chairman.
Seeff said the property industry is facing some of its toughest trading conditions in close to three decades. The biggest concern for real estate professionals is the continued high household debt ratio and the growing number of debt defaulters, despite lower interest rates.
“We understand that we cannot stave off an interest rate hike for much beyond the third quarter of this year, but a premature hike would undermine the already shaky confidence in the housing market. “We need to at least see an increase in sales volumes before we can absorb a rate hike,” added Seeff. – Denise Mhlanga
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