The Reserve Bank should have been brave and should have cut the interest rate to kickstart the economy. Instead, the Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.75%, leaving the mortgage rate at 10.25%.
The MPC should have taken a more aggressive stance as there is adequate reason for a rate cut. The inflation rate remains fairly benign at around 4.4% and the exchange rate has been relatively stable, so there is no immediate risk.
It has been one of the most challenging years for property with a great deal of buyer apathy and too much fence sitting, based perhaps more on conjecture than reality. Post-elections, it has been more of the same. There is no indication that buyers are flooding back to the market as yet, but it is perhaps a little early to judge given the onset of winter. We will have to wait until summer to see whether there has been an effect on the property market and economy.
Rise in stock levels
This, despite market conditions now weighted in favour of buyers. The continued weak economic climate and low demand has led to a considerable rise in stock levels while price growth has flattened to around 4% at best, barely keeping tread with inflation. Across most areas, it is an excellent time to find a good deal in the market, but it seems that buyers are not taking the opportunities.
Additionally, increased competition among the banks for the limited pool of mortgage loan applications means that we have a more favourable lending climate and it should be a little easier for buyers to obtain mortgage loans.
Those who are buying are looking for an irresistible price and sellers should be ready to capitalise on that demand. The reality of an overstocked market means that although there is an expectation of improvement, indications are that the market will continue to trade relatively flat for the rest of the year with price growth forecast to remain in the range of 4% at best.
It is a great time to buy and buyers should now take advantage of the opportunities in the market.