South Africa's prime rate is still too high to stimulate the property market, Colliers Residential said on Tuesday.

It was responding to the SA Reserve Bank's Monetary Policy Committee decision to leave the repurchase rate unchanged.

"The repo rate has now remained unchanged since August last year at seven percent.

"This leaves the prime rate at 10.5 percent, which is still too high to stimulate the property market," said Brian Falconer, CEO of Colliers Residential.

"We can understand the Reserve Bank's reluctance to afford debt-strapped consumers a further 50 basis point cut, but it is disappointing that our interest rates remain so high," Falconer added.

A few signs of recovery

He said while there were a few signs of recovery in the property market, notably in upward house prices, other indicators remained negative.

"For instance, the total value of building plans passed by larger municipalities decreased by 23.1 percent, or R17.4-billion, in the first 11 months of 2009, as reported by Statistics SA."

He said this was a true leading indicator and it meant that consumer and investor confidence in the property market remained low.

"Of particular concern to us is the fact that the largest decrease in approved business plans was for residential buildings, which fell by 38 percent, or R13.9-billion.

"This is a clear indication that the market will remain sluggish during 2010 without the external stimulus a rate cut would have provided."

Inflation under control

While Falconer said he "understood" the SARB's decision, he said there had been "significant favourable data" to have led to a different decision.

He added that at 5.8 percent, inflation was under control while festive season retail figures were down at their lowest level for a decade.

"While some commentators have viewed this as a consequence of job losses caused by the recession, another view is that people are concerned about incurring additional debt ? credit extension was down 1,59 percent year-on-year in November 2009 ? this would mean that the Reserve Bank's policies regarding credit have succeeded in their intent."

Falconer said he hoped for "a little more latitude next time around."

He added that the property market needed positive stimulation, and he hoped this would come around later this year.

"But for now, we have to get by with what we have."