SOUTH Africa’s property buying boom fuelled by low interest rates is not going to slow down any time soon, according to Finder.com’s SA Reserve Bank (SARB) repo rate forecast report released this week.
The Monetary Policy Committee interest rate decision is due to be heard tomorrow.
Some 59 percent of Finder’s panel, which houses economists such as Efficient Group’s Dawie Roodt, Economists.co.za’s Mike Schussler and Intellidex’s Peter Attard Montalto, among others, said the boom would sustain itself for at least another year, with 30 percent saying the trend would continue until the end of next year and 29 percent saying it would last even longer.
Only two panellists, or 7 percent, thought the market would slow down by November.
Alexander Forbes chief economist Isaah Mhlanga thinks the boom will last for another year due to the historically low repo rate.
“House prices have declined during the pandemic and due to the reduction in interest rates. Monetary policy will start to raise interest rates in 2022, increasing the cost of servicing debt and reducing affordability and demand for property,” said Mhlanga.
Some 97 percent of panellists said they expected the repo rate to hold this week, with a few panellists, which included Standard Bank head of SA macro research, Elna Moolman, saying it would rise next year.
“We see the inflation outlook as benign enough for the SARB to continue supporting the economic recovery in a prudent manner. In our view, the SARB can and should delay interest rate hikes till 2022,” said Moolman.
Citadel chief economist Maarten Ackerman concurred that the bank should hold the rate until 2022. Both Ackerman and Moolman said the current rate environment was fuelling the property market. “We are in a buyers’ market and with current interest rates at all time lows, more consumers can enter the market,” said Ackerman.
Investec chief economist Annabel Bishop thinks the rate will hold this week but said any rate increase should not happen until at least in 2023.
Bishop was part of the majority, 54 percent, who said the boom had negatively affected the rental market.
However, 25 percent did not think the boom had negatively affected the rental market and did not expect it to do. Four Rivers managing director Lebohang Liepollo Pheko said the market would continue to be supported by young adults and students.
“Younger people who are still climbing the property ladder will still rent, because they feel uncertain about the future. In addition, unemployment numbers among potential buyers who work in Covid-19 vulnerable sectors are also more hesitant to buy,” she said.
The top factors preventing a rate hike cited by panellists included a slow recovery of the employment rate (62 percent), inflation being contained this year (55 percent) and accommodative US monetary policy (45 percent).
Meanwhile, in its FNB Residential Property Update, FNB economist Koketso Mano said low interest rates resulted in pent-up demand for mortgages, driving rental unit vacancy rates up and constraining rental inflation.
According to the bank’s update released this week, rental inflation bottomed in March and it expected a gradual normalisation. It added that rent-to-own demand was slowing but estate agents expected market conditions to remain robust in the near term. It said together with new supply and elevated vacancy rates, this could keep rental inflation contained.
given.majola@inl.co.za
BUSINESS REPORT