The interest rate is low. This was the conclusion of Gideon Hanekom and Nolan Allnutt from Anne Porter Knight Frank when they compared rate fluctuations over the past 21 years.

“A study of the history of interest rates,” said Allnutt recently, “should boost confidence among the more timid buyers and knock out some of the wild talk and pessimism that is currently being experienced in the residential property sector.”

The current interest rate level of 14.5 percent is lower than South Africa has had for 14 of the last 21 years. But for all except two of those 21 years, sales countrywide had been satisfactory. It was only in the 1997/1998 period, he said, that sales actually tapered off markedly.

Throughout the period from 1987 to 1993, added Allnutt, a period which is often harked back to because throughout that time interest rates remained very steady, the rates had in fact been some 1.5 percent higher than they are now.

“What history is telling us,” said Allnutt, “is that now is a good time to buy because, firstly, the rates are not excessive and, secondly, after possibly increasing by a further 0.5 or even one percent later in the year the rates are almost certain to go into a decline. This will be very beneficial to the housing market especially since some economists are predicting as much as a two to 2.5 percent decline by the middle of 2010.”

“Interest rates go through periods of ‘natural’ cycling as can be seen in the three clearly visible cycles from 1994 to the present. If a straight line is superimposed on these cycles, it clearly reveals a downward trend in the overall interest rate. This is something to keep in mind.”

Referring to certain Standard Bank figures, Hanekom said that a nine to 11 percent price growth had been the average in the South African housing market over the last 30 years and this, he said, is a satisfactory return ‘however you measure it’.

In the territories that they serve, said Hanekom, demand and price increases continue to be above average because land remains in short supply and so many people see these suburbs as the ideal stepping up area to take them into the middle and upper middle categories.