Pretoria - The residential property market is likely to be nudged even further into a buyers' market by last week's half a percentage point increase in interest rates by the Reserve Bank.
FNB Home Loans reported last week that three out of four residential properties were now being sold for less than the asking price and the average length of time a home remains on the market before it is sold has increased from eight to 10 weeks between the first and second quarter of this year.
Both these market activity indicators are now likely to deteriorate further.
The retail property market, which is sensitive to changes in consumer demand and credit extension, is also likely to slow down, but the impact on the office and industrial property markets is expected to be muted.
However, the surprise half percentage point interest cut by the US Federal Reserve on Friday is likely to lead to a strengthening in the rand versus the dollar exchange rate, which will help to reduce inflation in South Africa and dampen the prospects of further interest rate increases this year.
Jacques du Toit, a senior economist at Absa group economic research, said the rate of growth in residential property prices was expected to taper off towards the end of this year and possibly into next year because of the influence of the interest rate increases together with the National Credit Act.
Du Toit said that apart from the housing market, the retail property market would be most affected by the latest increase in interest rates because consumer demand and credit extension would taper off. However, the office and industrial property markets were less interest rate sensitive.
He said the cut in US interest rates would not have any direct impact on South Africa, and if oil and food prices, together with the rand exchange rate, continued to have a negative influence on domestic inflation, there could be further increases in interest rates.
John Loos, a property strategist at FNB Commercial Banking, said the US interest rate cut could be positive for the rand.
"It [the rate cut] will keep the soft landing going and not let the US economy go into recession," he said.
Jeanne van Jaarsveldt, Re/Max marketing and financial director, said the interest rate hike would force a further slowdown in both sales volumes and prices in the residential property.
Tess Rodrigues, a property finance specialist at Property Factor, said homeowners who were already under home loan repayment pressure would now be forced to sell their homes.
"If previously you had any doubt, this confirms that it is indeed a buyers' market. Those who wish to sell should do so sooner rather than later, as more stock will be entering the market and buyers will have plenty to choose from. It is already taking up to 10 weeks to sell a property and sellers can now expect their properties to take even longer to sell," she said.