The SA Reserve Bank's recent decision to keep interest rates on hold has made many property investors breathe a sigh of relief, the Alliance Group said on Monday.

Both investors and property owners had realised that the country was most likely at the top of the interest rate cycle, Alliance group chief executive Rael Levitt said in a statement.

He added that investor sentiment in the residential and commercial property market had improved significantly over the last two weeks.

"Trading on our auction floors in August throughout the country has seen the strongest investor appetite in over 12 months, and our success rates and bidding activity has literally changed overnight."

Before the SARB's decision to leave rates on hold, investors were starting to believe that the property market was heading into recession and with political insecurity, crime, xenophobic attacks, electricity constraints food and fuel inflation, sentiment nosedived quickly, Levitt said.

"South Africans are naturally resilient investors but consumer and business confidence took a big knock in the first half of the year."

According to Levitt the commercial property market tracked interest rates. While there had been "insignificant pockets" of financial distress in the sector, this market has been relatively strong, despite plummeting business confidence.

Local investors who had seen downturns in the 1990s realised that the current down cycle was nowhere near the slump of this period, when investors shied away from property investment.

"In fact, most of our investors now realise that if interest rate levels are peaking, this is the time when they should be investing in a market which is offering great value," Levitt said.

As South Africans got used to the neutral stance adopted by the Reserve Bank, they would realise that there was a small window of opportunity to get into fixed property investing, which had all the right fundamentals for medium and long term growth, Levitt added.

The economy wasn't out of the woods yet though and the residential property market was burdened with the high cost of borrowing.

"We still see further price deceleration into 2009 and increased mortgage stress which always has a lag effect after interest rates have spiked."

However, Levitt added that there were many residential buyers, including investors, with deep pockets who were snapping up residential properties in suburbs across the country at what would be seen as bargain basement prices in two year's time.

"Many buyers realise that the next six to 12 months will be the best time in 20 years to buy residential property."

Sapa

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