Rate Hike Announcement "Good News"

Interest Rate Hike Less than Expected

The monetary policy committee's recent decision to hike interest rates by just 50 basis points, as opposed to the expected increase of 200 basis points, came as a relatively "ironic twist" and proved to be relatively "good news" for the residential property market in particular.

Homeowners are already under immense pressure with rising food and fuel prices and there were fears of at least a hike of 100 basis points after Reserve Bank governor Tito Mboweni hinted to the public. However, the residential market is still to experience the effects of the last increase in April.

Estate agents seem relieved, but are also aware that the market is still yet to experience the effects of the latest hike. The residential property market is bound to see a further slowdown in house prices and more "distressed" mortgage bond holders in the coming months. There is also the distinct possibility of more interest rate increases.

Whatever the case, it is clear that consumers will continue to feel the pinch of high interest rates and soaring food and fuel prices for some time to come. The market may be experiencing a slowdown, but there are many who believe that this is just part of a natural cycle sped up by a world economy in crisis. Experts have indicated that the situation is likely to continue for some time to come, but ultimately it will improve.

The information in this article is courtesy of Nick Wilson ("South Africa: Property Sector Relief at Rate Hike", Business Day, 13 June 2008).

If you would like to buy or sell property in Cape Town's False Bay area, please visit www.falsebayproperty.co.za or www.coastalrealestate.co.za.