By Mc Donald Chapalapata, Contributor:
One of the country’s property dealers, Press Properties Limited (PPL), has said the recent decision by the Reserve Bank of Malawi (RBM) to reduce the bank rate would spar growth of the property market.
Last month, RBM slashed the policy rate—a key driver of interest rates on loans—to 14.5 percent from 16 percent.
This saw commercial banks in the country lowering their base lending rates and realigning them to a minimum of 14.9 percent and a maximum of 26 percent.
PPL General Manager, Martin Chimangeni, said the movements would positively affect mortgage rates and assist in house ownership schemes and reduce takeovers.
“At household level, reduced lending rates will positively affect mortgage rates. Low mortgage rates would assist in house ownership schemes and reduce takeovers that have been evident in the daily newspapers the past two to three years.”Advertisement
“Real estate developers who develop for sale would realise better returns with lower lending rates,” Chimangeni said.
He said this may spur development of more housing schemes, commercial buildings and shopping malls, provided the move is sustained beyond the general elections and lean period thereafter.
Mortgages are normally priced at a bank’s base lending rate.
Chimangeni said reduced lending rates would also affect loans and cost of financing from borrowers.
“This would mean available financing to investors and would-be investors for sustained development of assets. It remains to be seen how lenders would price their processing fees for an overall reduced rate on loans,” Chimangeni said.
He said, if inflation remains low and lending rates keep going down, overall gross market yields for real estate would be positively affected.