Continuing low interest rates raise confidence in the housing market

According to Bill Rawson, Chairman of the Rawson Property Group, this week’s decision made by the Monetary Policy Committee to leave the interest rates unchanged was expected by almost everyone in the residential property sector because unemployment in South Africa is still at very high levels and GDP growth remains unimpressive – with most forecasts predicting between 2,2% to 2,7% this year.

“The government has its eyes on the 2014 election and is, it seems, likely to keep in with COSATU. The government realizes, therefore, that employment has to be improved and keeping the interest rates low is one means of helping in this matter.”

Rawson added that operators in the residential sector can be grateful that the interest rates are remaining unchanged because it will reinforce the public’s belief that rates are likely to remain low for the foreseeable future, i.e. for 18 to 24 months, which, in turn, encourages potential home owners to take the plunge – if they can get a bond.

Obtaining a bond, said Rawson, is often not as difficult as less informed people think.

“The repeated complaints in the media on this subject have led some to believe that they will never qualify. It has to be pointed out, however, that in certain Rawson Property Group franchises, after credit record rectification and thorough prequalification exercises have been carried out, agents are getting exceptionally high bond application success rates – in one case (Bergvliet) – they have had a 100% success rate over the last six months.”

The current challenges in the residential sector, added Rawson, ‘are not that onerous’ when compared to those of previous high interest rate periods, for example in the 1980s when bond rates rose as high as 25%.

“Although people seem to have forgotten this era,” said Rawson, “at that stage, virtually all of our buyers were government subsidized employees. Today’s market is, by comparison, relatively easy. Nevertheless, it has to be acknowledged that until the government makes it possible for the banks to lend more freely and with slightly fewer safeguards, there is little prospect of residential housing and, I believe, the gross domestic product growth rate improving. The banks’ policy here quite clearly dictates the future economic outcome for the nation.”

Article from: www.rawsonproperties.com

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