Time to buy property, says Samuel Seeff, chairman of the Seeff Property Group. This, as today’s (19 September, 2024) 25bps interest rate cut by the Reserve Bank brings welcome relief for consumers and property buyers. The rate cut takes the repo rate to 8% which means the base home loan rate should reduce to 11.5%.
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Seeff says, “We would have liked to have seen a 50bps cut, but we are happy to take 25bps, and hope this is the first of more rate cuts to follow, he says further. Especially, given that the US Fed cut its rate by 50bps and plans two further rate cuts of 25bps each. This follows recent cuts by the Bank of England, and two cuts by the European Central Bank.”
“The rate cut has been hotly anticipated by the property market given the improved economic indicators. We heard this week that the CPI has declined further to 4.4% which is now within the bank’s target range.”
“The Rand has continued to strengthen and dipped below R17.50 to the US dollar this morning, from a high of R19.2 in late April. The falling oil price and pending petrol price cut should bring further relief to consumers.”
Positive effects of GNU
Seeff says the scene is set for the economy and property market to grow, but both need more interest rate relief. “We are seeing the positive effects of the Government of National Unity (GNU) starting to bear fruit. The energy grid has also now been stable for close to six months which is a huge boost for the economy.”
“There is a lot of pent-up demand in the market, with estate agents, sellers and buyers all eagerly anticipating that this cut will have a positive impact. On top of the petrol savings and lower inflation, the rate cut will add money back into the pockets of consumers to spend in the economy, and improve affordability of homes.”
“Best of all, while no-one ever rings a bell to tell you that the market has bottomed out and it is time to buy property, we certainly believe that we are potentially in one of the best markets for property buyers. Price growth has been particularly weak over the last two years, especially in markets such as Gauteng and KZN and other inland areas.”
“Buyers are therefore able to find good value, and they should take advantage before the market takes off again. Buying now just before the market takes off again means you can find property at prices similar to what they were two years ago, and can potentially then benefit from capital appreciation as property values tick up again.”
Seeff adds that more buyers in the market is also good news for sellers. “Agents certainly anticipate an increase in offers, especially as we move into the warmer months. Once competition and momentum in the market increases, prices should start ticking up.”
“A healthy and growing property market is not only good for getting more people into their own homes, but a vital economic contributor and economic multiplier. Aside from transfer duty tax for government, agency commission, and attorney’s fees, there is an entire value chain that benefits, from movers, builders and renovators to decorators, and so on. It is also a catalyst for further infrastructure development and growth including housing.”
As a result of the 25bps rate cut, mortgage repayments will reduce as follows:
R750 000 bond – from R8 128 to R7 998 – thus saving R130
R900 000 bond – from R9 753 to R9 598 – thus saving R155
R1 000 000 bond – from R10 837 to R10 664 – thus saving R173
R1 500 000 bond – from R16 256 to R15 996 – thus saving R260
R2 000 000 bond – from R21 674 to R21 329 – thus saving R345
R2 500 000 bond – from R27 093 to R26 661 – thus saving R432
Seeff Property calls for more robust rate cuts
Further to the decision by the Reserve Bank to cut the repo rate by 25 basis points, Seeff adds that while the rate cut is welcomed, it is disappointing that the Bank has missed the opportunity for a more robust cut to stimulate the economy.
“There was more than adequate reasons for the Bank to provide a 50 basis point cut, and it is concerning that the Bank appears to be taking a hawkish stance, particularly since the US Fed opted for a bold rate cut of 50 basis points. Inflation is down to within the Bank’s target range, the currency outlook has improved, as have the economic indicators.”
Seeff says it is simply unacceptable given that the economy and property market needs much more. “We simply cannot continue to sustain keeping the interest rate so high for so long. It is counterproductive to growth at a time when the economy desperately needs a kickstart,” he concludes.
