The Monetary Policy Committee’s decision on Thursday to keep the repo rate at 5.5% and prime lending at 9% comes as no real surprise and offers a continued respite to debt burdened homeowners.

This was widely anticipated and is welcome, said Dr Andrew Golding, CE of the Pam Golding Property group, particularly against a backdrop of rising oil and food prices coupled with increasing electricity tariffs.

“Consumer spend generally remains cautious as a result of ongoing concerns regarding household debt.

“And amid market speculation regarding an end to the current cycle of lower interest rates, it is hoped that interest rates will remain stable at least for the remainder of this year in order to stimulate further economic growth, bearing in mind that job creation remains a key focus,” said Golding.

He said that from a residential property perspective Pam Golding Properties continues to see a gradual, albeit modest improvement in sales volumes and in house prices. “It should be borne in mind that we are still seeing the effects of the latter part of last year’s reduction in interest rates permeate through the marketplace, helping sustain residential sales across most price sectors.

“However, although relaxed to some extent, strict bank lending criteria continue to keep a rein on any significant recovery in the housing market,” added Golding.

He said that while it’s true that interest rates are at a historical low, first-time buyers entering the market still face affordability issues. This is “due to the higher municipal rates and increased electricity costs, among other costs inherent in the purchase and upkeep of a home, and this is exacerbated by restricted access to finance.”

“On a positive note, what we are noticing is that those sellers who are receptive to pricing their homes at realistic, market-related prices are reaping the benefits and achieving sales,” said Golding.

He said that for investors who have access to finance or with high liquidity, there are still good buys to be had, as property prices in the main have remained relatively constant over the past year or so. “Having said that, there are many areas or locations where properties continue to achieve sound growth in value, and will continue to do so, making the case for investment in property as valid as ever”.

While most remain cautiously optimistic about continued economic recovery, said Adrian Goslett, CEO RE/MAX of Southern Africa, there are definite signs of improvement. “Aside from the interest rate remaining stable, The South African Chamber of Commerce and Industry’s Business Confidence Index for January 2011, which is at 87.4, indicates a vast improvement from January 2009 (82.4) and 2010 (81.2).”

It is anticipated that 2011 will be a fairly flat year for the property market, said Goslett, as debt-to-income ratios are still at a relatively high level and as distressed homeowners continue to make use of the various bank programmes to assist them in selling property they can no longer afford.

“As there is still limited access to finance, rental markets are expected to peak while qualified buyers will be able to make the most of the property investment opportunities that are currently there for the taking, a situation which certainly won’t last forever as interest rate hikes are expected later in the year,” said Goslett.

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Estate agents say bank lending criteria hampers market

Estate agents have painted a rosier picture for the residential property market in 2011, but warned that prices were being held down by bank’s strict lending requirements.

Berry Everitt, CEO of the Chas Everitt International property group, said on Wednesday home price growth would pick up again towards the middle of 2011, but would be constrained until banks become more lenient.

“I do think that this (the housing market) will be constrained below 10 percent unless the banks become quite a lot more lenient – which is going to take time because household debt levels are still high and they are still dealing with quite a large number of distressed sales and properties in possession,” he said.

Everitt said the property market had “excellent opportunities” for investors who could afford to buy additional properties, with the best “buys” being properties in popular coastal locations.

Jan Davel, the managing director of the RealNet estate agency group, said the residential property market had several factors in its favour for 2011, including exceptionally low interest rates, slower than expected consumer price inflation and decreasing levels of household debt.

Low interest rates were helping the property market by putting extra money into “household piggybanks” and boosting the demand for credit such as home loans, he said.

“Over the past few months this has already been evident in an increase in home sales activity that will no doubt continue if there is another rate cut early in the year, which many economists are predicting,” Davel said.

Property professionals and consumers however, all still had to be cautious and patient. “We are not going to see another boom period like 2003 to 2006 anytime soon,” he said.

“The market is going to take some time to recover, and we don’t foresee a major upswing in 2011 or even 2012.”

Lew Geffen, chairman of Sotheby’s International Realty in SA, said he was “bullish” about the prospects in 2011 for the market sector in which his company operates, where the average sale price is around R2.5 million.

“In 2010 we saw volumes increase in this sector by 30 percent and prices move up by around eight percent with the third quarter being particularly encouraging, and we expect this positive trend to continue in 2011.

“The market has really bottomed out now, lending has loosened up somewhat and pent-up demand among those looking to upgrade is starting to come through.”

Geffen said buyers coming into the market were “real quality”.

“We are seeing a bond application refusal rate of just four percent compared to an average of 15 percent historically,” he said.

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