Rates - Ray of Hope?

If current interest rates are held steady at this week’s Monetary Policy Committee (MPC) meeting could it be the first ray of hope towards a market recovery?

Certainly, Jeanne van Jaarsveldt, marketing and finance director of RE/MAX SA, believes it could be the first, albeit small, but definite sign, towards the property market decline bottoming out.

His view is substantiated by feedback from the group’s regional offices, which places consumer uncertainty on interest rate patterns as a major obstacle toward a market recovery.

Also cited as a recovery restraint is the current political uncertainty and while van Jaarsveldt admits this potency is not to be under-estimated toward normalisation, he believes its effect has become increasingly shaded by growing disposable income fears. “Unfortunately the ghost of mid-1998 when rates surged almost overnight to 25 percent still permeates the market and this is definitely having a dampening effect.”

Even if rates are left unchanged on Thursday, van Jaarsveldt, says the effect will be minimal in terms of actual sales, but the impact will be encouraging in restoring much needed confidence. Other factors likely to add to that assurance is the recent reduction in world oil price and positive political progress emerging from the Zimbabwean talks. He points out that a genuine settlement in that country could encourage the many hundreds of thousands Zimbabwean refugees living here returning home and easing the still apparent simmering xenophobia in South Africa.

From a market point of view, Van Jaarsveldt says, with few exceptions all areas report increased showhouse interest with commensurate interest, “but the greatest resistance to commit remains emphatically doubts on future interest rate patterns.”

 

 

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