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January Interest Rate Decision
FNB - South Africa
Today’s interest rate hike puts bets on further residential market strengthening off, but will at the same time serve to keep market behaviour healthy and free of speculative behaviour.


  • For the residential property market, this interest rate hike is seen as a negative for growth in demand, thus likely to have a containing impact on house price growth. All bets are off regarding any noticeable rise in house price growth compared to recent levels, and single-digit price growth is expected to remain a characteristic through 2014.
  • The new repo rate level, which leaves the prime rate percentage at 9%, slightly above house price growth, does not promote unhealthy short term speculative buying on a large scale, because it is not easy to borrow money at prevailing rates and make quick capital gains. From a point of view of preventing major speculative activity in the residential market, therefore, this level of interest rates would appear appropriate.

January Interest Rate Decision

The Rand and Residential Property
FNB - South Africa
We have identified 4 potential ways in which the Rand’s slide can impact on the domestic residential property market. They are:

  • In that the Rand is seen as the country’s “share price”, and thus often causes a deterioration in sentiment, it is possible that this general sentiment deterioration can cause a more cautious residential property investment approach.
  • A weaker Rand potentially exerts upward pressure on domestic inflation via the prices of imports. Given the SARB’s 3-6% consumer inflation target, this may have implications for interest rates, and speculation of earlier-than-previously expected interest rate hiking has indeed arisen as a result.
  • The weaker Rand has made domestic property values substantially cheaper on average in key foreign currency terms. Does this have a potential positive spin-off though boosting foreign buying? Perhaps, although we don’t see anything more than a moderate rise in foreigner buying in our survey since 2011.
  • In that the Rand drives a domestic sentiment deterioration, as well as making the earning of foreign currency in a foreign country that much more attractive, it may assist in boosting emigration-related home selling, a negative for the local residential market. Admittedly, though, this time around we have yet to see it in our Estate Agent Survey, but some of the great Rand slides of previous decades have indeed been accompanied by major emigration surges. 

Which of the 4 potential impacts do we currently believe to pose the greatest risk to the residential market? Undoubtedly the 2nd one, i.e. the potential upside risk to interest rates that it poses. Recent speculation in this regard alone may be damaging to residential demand, although it remains to be seen whether Rand weakness does indeed lead to actual earlier interest rate hiking. Important too, is to understand that this week is the SARB’s MPC meeting, a week in which interest rate hype and speculation is indeed heightened in the media, and it is possible that this subsides once more from next week onward. But potential impacts of the Rand on interest rates are a risk that can’t be ignored.
The Rand impact Jan 2014

Access to South African legislation now free
Tech4Law - South Africa
Many aspects of our daily lives involve laws: registration of births and deaths, marriage, divorce, writing of wills, employing and firing employees, living in a sectional title home, paying income tax, to name a few. For the man in the street access to up-to-date versions of South African legislation will henceforth be free of charge.This is thanks to the joint venture between the University of Pretoria and the South African Legal Information Institute (SAFLII) which was launched on Tuesday by Judge Edwin Cameron of the Constitutional Court.

?The situation in South Africa is that there is no reputable and free public source of current national legislation,? the CEO of the SAFII, Mr Roger Gachago, said. ?While there are scattered websites that offer varying types of free legal information, there is none that is authoritative and even fewer that offer current information.? This is good news for South Africans at large, many lawyers, students, government officials and even foreign investors who have had access only through paid subscription with one of the commercial publishers ?at a cost.

The project was initiated and is managed by Shirley Gilmore, Head Librarian at the Oliver R Tambo Law Library at the University of Pretoria. The project will employ three full-time personnel, who will systematically produce consolidated versions from the original enactments and their various amendment Acts and regulations. Although it is still a work in progress a fair amount of the most important Acts are already available in consolidated form (as of date this number stands at 82 Acts).

Interest on overdue levies encourages defaulters to settle arrears
IolProperty - South Africa
The debate continues on whether the interest rate charged on overdue levies should be capped or whether bodies corporate should be able to continue charging the rate they feel is necessary, says Propell operations manager Mandi Hanekom.

There has also been debate about whether the prescribed rate of interest (PRIA) - which is now 15.5 percent a year - applies in cases such as these. Previous case law shows the PRIA rate does not apply to interest amounts for sectional title scheme levies.

'When trustees are determining what interest rate to charge, it would usually be the rate they would have to pay if they borrowed money in lieu of the levies due,' Hanekom said.

'If you compare the PRIA rate with what is charged commercially, it is not high enough.'

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