Cape Town - Economists, academics and property specialists forecast that the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) meeting on Thursday is set to increase the repo rate and speculated on the impact the rise is likely to have on the property market.
At the previous meeting in July, the MPC increased rates by 75 basis points. A hike in the repo rate will also raise the prime lending rate, which will mean that the interest owed on any debt will automatically increase. It also means that any interest earned on savings will increase.
RE/MAX Southern Africa chief executive Adrian Goslett said: “This is why it is so important for homeowners in particular to listen out for these announcements so that they can plan for the new instalment on their home loan should the prime lending rate change.”
University of the Free State Banking Professor Johan Coetzee said he expects to see Cape Town property prices increase the most.
Coetzee thinks prices there will increase by 7%, far higher than his predictions for the other cities included in the survey, with Johannesburg, Pretoria and Durban set to see small increases of just 3 to 4%.
At the same time, ETM Analytics co-head of financial markets, Kieran Siney, gave a more modest forecast for Cape Town with just a 2% increase. However, he expects small price drops in other parts of the country, like Johannesburg and Pretoria.
Nedbank analyst Reezwana Sumad said Cape Town and Durban would see the biggest increases of 6% each, while predicting 1% to 3% increases for cities like Pretoria and East London.
The forecast increases in Cape Town are reflected in the boom in residential construction in the Western Cape, which increased by R7.4 billion between January and June this year compared to 2021.
Meanwhile, FNB Commercial Property Finance strategist John Loos said that for the Western Cape, years of building a popular “brand” as a lifestyle and well-run region appeared to be increasingly paying off for the Western Cape economy and property market.
“For over two decades, we have noticed a mounting net semigration trend of skilled and higher income households, most notably in the direction of the Western Cape, but also to certain KZN coastal regions.”
He said this had led to the expectation that the Western Cape economy would at some point begin to outperform the rest, because South Africa’s modern services-dominated economy was heavily dependent on skilled labour and the Western Cape was best at attracting and retaining these.
He said that on top of this, the skilled migrants brought significant purchasing power to the region.
“It would appear that the Western Cape currently marches to a very different economic beat to the rest of the country, the bulk of the country’s economy experiencing more significant economic and property market pressures,” Loos said.
mwangi.githahu@inl.co.za