Home South African SARB’s Monetary Policy Committee expected to increase repo rate this week

SARB’s Monetary Policy Committee expected to increase repo rate this week

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The South African Reserve Bank’s Monetary Policy Committee is set to increase the repo rate this week, according to Finder.com’s SARB Repo Rate Forecast Report.

File picture: Bongani Shilubane/ African News Agency (ANA)

THE SOUTH African Reserve Bank’s (SARB) Monetary Policy Committee is set to increase the repo rate this week, according to Finder.com’s SARB Repo Rate Forecast Report.

The majority (70 percent) of the Finder’s panel of 20 economists, academics, and property specialists expected the rate to increase, while just 30 percent said it will hold.

Efficient Group chief economist Dawie Roodt also thinks the MPC will, and should increase the rate, given that they are increasing internationally.

This sentiment was also shared by Oxford Economics Africa economist Jee-A van der Linde.

“Based on the further rise in US inflation, pick up in wages, and the Fed’s hawkish policy pivot, we forecast that the SARB will implement a 25 bps increase in each of the four quarters this year,” Van der Linde said.

However, IQbusiness chief economist Sifiso Skenjana disagrees and thinks the SARB should take a wait-and-see approach.

“While inflation in the US has come out at levels last seen in 1982, putting upward pressure on interest rate expectations in the US, the SARB should take a more measured approach and keep interest rates on hold, while price path data continues to come in we expect domestic inflation will moderate and a move to increase interest rates would strangle and an already struggling South African economy,” Skenjana said.

Whether or not a rate increase happens in January, the panel was confident that the rate will increase this year. Half the panel thinks the rate will increase four times in 2022, while 30 percent said three times, 15 percent said twice and 5 percent said once.

With the panel forecasting a number of rate increases this year, it only expected property prices to experience marginal growth with Cape Town boasting the biggest gains.

Cape Town property prices are expected to increase 3.38 percent on average, followed by Pretoria at 3.17 percent, Benoni at 2.83 percent and Port Elizabeth at 2.43 percent.

TPN chief executive Michelle Dickens also said increased property expenses will soften price growth.

“Property expenses have increased faster than rental escalation, particularly municipal administrative costs driving down income yield; coupled with years of flat capital growth discourages current micro landlords from staying invested. TPN notes that for the first time, in 2021, there was net loss of rental properties in the market. More rental properties sold off than brought into the market,” Dickens said.

Jawitz Properties chief executive Herschel Jawitz was more bullish. He said that despite slowing demand from first-time home buyers there will be increased demand in the middle and upper end of the residential market.

“Buyers will continue to enjoy an almost perfect buying market with low interest rates, sluggish property price growth and a positive bank lending environment. While the market will remain a buyer’s market for now, sellers will see the benefit of realistic pricing and steady demand from buyers,” Jawitz said.

ETM Analytics co-head of financial markets Kieran Stephen Siney said some segments of the market will perform better than others.

“The top end of the property market is expected to perform relatively well despite rising rates and a fragile economy. As rates are raised against the backdrop of tough economic times, we expect the middle to lower tier of the market to come under some pressure,” Siney said.

The Finder’s panel thinks the continuing semigration will be the biggest property trend in 2022 at 62 percent, followed by increased demand for coastal properties and increased housing security at 38 percent each and an increase in home auctions at 31 percent.

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