Further hike in interest rate not supportive of housing demand, says Dr Andrew Golding (increase of 25bps)

Posted On Thursday, 17 March 2016 16:26 Published by
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The Monetary Policy Committee’s decision to further increase the repo rate was unfortunate off the back of the January (2016) hike and given the pressing need to help stimulate growth in South Africa’s economy, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

Andrew_Golding_Pamgolding

“We had hoped that the repo rate would remain stable following the good news that the rand had strengthened since the last MPC meeting and South Africa’s fiscal policy has tightened, taking some pressure off monetary policy. Coupled with this, on the global front the Federal Reserve Bank is not hiking rates as aggressively as initially anticipated and the European Central Bank continues to ease monetary policy.

“Despite the fact that the country’s ongoing challenging economic pressures and fundamentals are  not driving  growth in the housing market, increasingly we are seeing that regional and area-specific demand is more dependent on a range of conditions and factors which include convenient location, lifestyle, infrastructure and long term investment potential.

“Although we are currently in an upward repo rate cycle, interest rates are still not near the highs experienced in 2008 and are not expected to increase significantly during the year. So although housing activity in South Africa has slowed along with house price growth, the demand for homes remains strong and the market retains its resilience.

This is further demonstrated by the market confidence shown by astute and experienced developers, who continue to bring new stock to market in high demand areas where uptake is brisk.

“Notwithstanding the recent weakness in the rand and the volatility of the stock market, our experience of the top end of the residential property market - as defined by properties greater than R10 million and up to R100 million - has been that there has been an increase in sales activity by as much as 30 percent in recent months, commencing from October 2015 to date.

This market has been particularly brisk in the Western Cape, Boland and Overberg, North Coast of KwaZulu-Natal and to some extent the Garden Route.

“So what we are seeing is that the luxury market, which was somewhat quieter last year, has picked up, particularly in the Western Cape’s Cape Town Metro –  a region which has proven virtually recession-proof in recent years and which sees an increasing influx of investors from all regions, particularly from Gauteng, with prime properties changing hands on the iconic Atlantic Seaboard at top-end prices, with an apartment on the beach in Clifton selling for R29 million for 288sqm which equates to just over R100 000 per sqm.

“We attribute this increase to a number of trends including: a migration of high net worth buyers from north of the country from Gauteng to the Western Cape and other coastal areas;  the investment market; and thirdly an increase in foreign buyers both from Africa and as well as the rest of the world and also as experienced through our association with Homecoming Revolution.

“African investors are purchasing property in South Africa for a variety of reasons.

Some are seeking investment properties or personal residences, which provide access to an upmarket lifestyle. More traditionally, some high net worth individuals are purchasing luxury seaside residential properties or other ‘lifestyle properties’ that not only provide them with a holiday destination or a second or third home, but, given the weak rand, represent an excellent means of diversifying their property portfolios and securing a sound long-term investment.”

Last modified on Thursday, 17 March 2016 17:58

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