Rate Cut Needed to Kick-Start Market

The information in this article is courtesy of Fin24 ( SA house market on edge – 9 March 2009)

A cut in the interest rate is what South Africa needs to kick-start the troubled property market.

According to John Loos, property analyst at FNB Home Loans, rate cuts could avoid the market from finding itself in a similar position as that of overseas markets. At the moment the UK and South Africa are experiencing the same difficulties such as strict lending criteria and rising unemployment, but the major difference is that our interest rate has room to fall and stimulate our housing market somewhat. The UK, on the other hand, doesn’t have this luxury with there interest rate standing at an all time low of 0.5% against South Africa’s 10,5%.

The UK is also struggling with house prices falling throughout the country by 17.7% on an annual basis. The latest statistics show that South Africa’s house prices declined by 6.6% on an annual basis.

Loos recons that an interest rate cut could have a positive effect on the market but he warns that South Africa’s economy is as exposed to global conditions as other markets.

iAfrica reports that the “cut off” for a potential inter-meeting MPC rate cut will probably come with next Thursday’s manufacturing production release. This could result in at least a 100 basis point rate reduction ahead of the official 16 April announcement, according to Atlantic Asset Management

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