Nick Wilson, Property Reporter
17 October 2003
Johannesburg — RESIDENTIAL property commentators say that yesterday's cut of 150 basis points in the repo rate will extend the present residential property boom as the option of owning your own house becomes more attractive.
Others also warn that pressure will be brought to bear on the already oversupplied rental market as the cut will make it more attractive to buy than to let.
Cape Town-based property economist Erwin Rode, of Rode & Associates, believes the current boom will be extended and that house prices will continue to rise.
" A rise in earnings means people will be able to afford more. It is beneficial to the salary earner and businessman whose earnings are dependent on consumption," Rode says.
Johannesburg-based property economist Francois Viruly believes the letting market will come under pressure.
"I think that over the past 12 months a number of investors have entered the property market with a view to buying in order to let," Viruly says.
He says that the letting market will come under pressure because lower rates mean that buying a house will become more affordable than renting.
Just Letting MD Raal Nordin says that the cuts will "add a little" to the oversupply in the rental sector. Nordin predicts that it will probably be a tenant's market for four to six months, but after that the rental market will start recovering.
Ronald Ennik, chief operating officer of Pam Golding Properties, says the interest rate cuts will contribute to confidence levels.
"Any move that increases money in the back pocket increases the feeling of buoyancy and that they (people) can go out and spend," Ennik says.
He says the market is seeing the emerging black middle class coming through and that the rate cuts will allow more first-time buyers from this middle income group buying homes.
"The sooner they become property owners the sooner they will enter the property cycle."
Ennik also says that SA is approaching more acceptable international levels as far as interest rates are concerned.
"These are in line with inflation targets and this has to contribute towards growth," said Ennik.
However, real estate agency Eskel Jawitz Real Estate predicts that house prices will stabilise over the one to two years.
Herschel0 Jawitz, MD of Eskel Jawitz Real Estate, says lower mortgage repayments will help offset the rise in property prices from an affordability point of view.
"The effect on the rental market, however, remains to be seen. With rental prices already dropping off by about 10%-15% because of an oversupply of rental properties, a 1,5% drop in the rate will encourage renters to buy rather than rent."
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