REPO RATE REMAINS UNCHANGED
Yesterday the Governor of The South African Reserve Bank (SARB) announced that the repo rate (the rate by which the SARB lends money to the commercial banks) would not change. It remains at 3,5% with prime at 7%. It should be noted that 2 of the 5-member board wanted to further reduce the rate, but were outvoted by the 3 other members.
The Bank highlighted that inflation is sitting at 3,2% for 2020 and noted some growth in the economy, with it coming in at -8%, which is slightly better than the bank’s previous estimate of -8.2%. The Bank attributes this to the easing of restrictions.
How does this affect the property market? It has not gone unnoticed that the historically low interest rates have caused an explosion in the housing market as the restrictions were lifted. The country’s Deeds Office has also returned to full function, meaning that matters lodged in the Deeds Office for examination and registration are made available in a matter of days rather than 6 – 8 weeks as was the case in May through to August. Low borrowing costs, coupled with a demand for housing so high that stock in certain price brackets is limited, as is made evident by the increase in the average purchase price from R1,193,944 in Quarter 3 of 2019 to R1,304,756 in Quarter 3 2020, equates to a 9.3% growth year-on-year. Effectively, the purchase price for first time buyers has increased from around R 1 050 000,00 to R1 100 000,00 - an increase of 15%.
Another trend is tenants or renters becoming property owners, capitalising on the abovementioned low interest rates, low prices of houses in certain segments and with the banks being happy to lend. Not having to place a deposit down means greater and easier access to the housing market. To end off, more first time buyers are entering the market, because it is now easier and cheaper than ever to do so and with some signs of an economic recovery signalling growth, this could mean even more individuals may enter the property market.