While many market commentators would probably have liked to be a fly on the wall during the Monetary Policy Committee’s earnest deliberations this week, the final outcome is what matters, and for homeowners with mortgages and credit debt, as well as aspirant home buyers, the news of a 25bps increase was not what they wanted to hear.
With October’s inflation of 5.1% in line with expectations – slightly higher than September’s 4.9% yet still within the 3-6% target range, and with some relief in the fuel price expected in December as a result of the oil-price slump, coupled with a stronger rand and against the backdrop of a tepid economy, it would have made sense to hold the repo rate stable, at least for now.
Indeed, the current recovery in the rand, coupled with the recent slump in the oil price, suggest that the local inflation outlook has improved somewhat, potentially easing pressure on the MPC to begin hiking interest rates in the near-term.
A pause in the repo rate cycle would have helped stimulate economic confidence and provided some relief to consumers – particularly at a time of year when many are looking ahead to the holidays and planning for the year ahead, as well as any home relocations due to a change in career or lifestyle.
Clearly, however, there are still inflation risks which may incline the MPC towards continuing on a modest hiking cycle in the New Year, particularly as the rand remains vulnerable to shifting investor sentiment and monetary policy tightening in the developed world. It would thus be wise for home buyers – particularly first-time purchasers – to factor this in along with the other costs associated with acquiring residential property.
On a positive note, we continue to see pockets of robust and also renewed activity in the housing market. Pam Golding Properties is seeing an uptick in sales in areas of Cape Town such as the Atlantic Seaboard, Southern Suburbs, Blouberg and Durbanville which have picked up considerable steam; Gauteng’s Hyde Park, Fourways and Pretoria; and in KwaZulu-Natal, the region north of Durban, while areas of the Eastern Cape such as East London and Port Elizabeth are also more than holding their own.
A notable trend in regard to sales in areas offering accessibly priced homes is a consistent demand and even in some instances, weighting towards buyers up to approximately 35 years of age, indicative of increased buying power and growth in the younger population of upwardly mobile consumers putting down roots for the future.
With electricity price hikes looming, existing and potential homeowners alike are likely to focus even more attention on energy-saving features to reduce municipal tariffs, as well as contingency plans for water shortages.
The case for home ownership and investment remains as compelling as ever, particularly in the current buyers’ market, as people need a place to call home, whether as an investment or primary residence.