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We had hoped for a pause in the upward repo rate cycle, says Dr Andrew Golding

Posted On Thursday, 27 January 2022 20:04 Published by
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There was room for a pause in the upward repo rate cycle, says Dr Andrew Golding.

Andrew Golding portrait photograph

In line with the MPC’s inflation targeting stance – and with global and local inflationary pressures building – today’s increase in the repo rate by a further 25bps resulting in a prime interest rate of 7.5% was not unexpected, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

Says Dr Golding: “Following on from November’s repo rate increase, we had hoped that there would be a pause in the upward cycle trend. However, with the December consumer inflation rate (at 5.9%) close to the upper limit of the Reserve Bank’s inflation target and with local risks to the inflation outlook firmly on the upside – the MPC was likely to take this decision to increase rates now. Notwithstanding this, the interest rate will hopefully increase slowly and over an extended period of time.

“Positively, for aspirant, first-time home buyers seeking mortgages, according to ooba, the average rate of concession remained at -0.2% below prime in December, which is the lowest rate since mid-2010, as banks continue to compete for market share. Repeat buyers fared even better, with an average rate of concession of -0.4%. Additional indications of favourable lending conditions include the 5.5% increase in the size of mortgages in Q4 2021 compared to year-earlier levels and the 24% decline in deposits as a percentage of purchase price during the same period. During the final quarter of last year, deposits stabilised at 7.0% of the purchase price compared to 9.2% in Q4 2020.

“And while 100% bond applications have stabilised, the approval rate continues to rise, reaching 83.7% in December, approaching the pre-Covid high of 85% in February 2020. In fact, the 83.8% approval rate for 100% loans extended to first-time buyers in December now exceeds the pre-Covid high of 83.1% recorded in February 2020.

“Pam Golding Properties continues to see encouraging momentum in sales activity in the housing market, while we also anticipate that a moderate rise in interest rates is likely to see the ‘buy-vs rent’ dynamic shift back towards rentals, possibly reinforcing the rising demand for investment properties seen in late 2021”.

Pam Golding Properties in Camps Bay had one of its busiest months in November (2021) selling over R115 million in property for the month. Says Dr Golding: “In December we concluded sales including a building in Clifton, below Victoria Road with direct access to the beach, for R80 million to a local purchaser who intends repurposing the multi-unit dwelling into a family home. 

“We have also achieved very strong performances in both Constantia and Bishopscourt with individual sales transactions in Constantia exceeding R70 million in November and December and individual sales transactions over R40 million in Bishopscourt over the same period. 

“Sentiment has been buoyed by the expectation that Covid-19 is less of a threat to the property market after strong sales post lockdowns and increased purchasing activity from international buyers, many of whom have bought top-end properties sight-unseen. There is no doubt that Covid-19 has changed buyers’ outlook and fast tracked their objectives to own a top-end property in the Western Cape.”

Adds Dr Golding: “Meanwhile in Gauteng, our Hyde Park operation reports a significant amount of interest and attendance at show days, with top end sales transactions concluded in Sandhurst in the R30 million upwards price band, and with good activity in the likes of Bryanston, Morningside, Westcliff and Melrose.”

Although the Pam Golding Residential Property Index shows national house price inflation slowing from a peak of 5.45% in May 2021 to 4.39% by year-end, the 2021 average of 5.1% was the strongest recorded since 2015 (5.9%).

Says Dr Golding: “The positive start to the year in terms of enquiries and activity, underpinned by ongoing consumer demand and favourable lending conditions, heralds an encouraging outlook for 2022.”

Last modified on Wednesday, 09 February 2022 20:17
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