Rate cut comments – ooba Group, Seeff Property Group, Pam Golding Property | Everything Property
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Rate cut comments – ooba Group, Seeff Property Group, Pam Golding Property

rate cut comments 21 november 2024

Top property commentators – ooba Group’s Rhys Dyer, Samuel Seeff of Seeff Property Group, and Dr Andrew Golding of Pam Golding Properties, share their view of the impact of the rate cut.

ooba Group’s Rhys Dyer, Samuel Seeff of Seeff Property Group, and Dr Andrew Golding of Pam Golding Properties offer their insight regarding the 21 November, 2024, interest rate cut.

WORDS : SUPPLIED :: PHOTO: PEXELS

ooba Group: Second Rate Cut for 2024 set to further spur homebuying activity

ooba Group CEO Rhys Dyer

Rhys Dyer, ooba Group

The South African Reserve Bank (SARB) has announced a 25 basis points reduction in the repo rate, lowering it to 7.75%.  This latest rate cut moves the prime lending rate down to 11.25%. This news marks the second and final rate cut for 2024 and is expected to further bolster homebuying activity following subdued demand in the ‘higher for longer’ interest rate environment.

Rhys Dyer, CEO of the ooba Group welcomed the news of another rate cut. “The financial relief from this month’s announcement, together with September’s rate cut, will be felt by homeowners and prospective homebuyers across the country.”

The rate cut was underscored by a positive outlook for inflation, with consumer inflation easing to 3.8% and producer inflation dropping to 1.0% in September. “And despite a minor increase in the petrol price earlier this month, the overall economic outlook remains relatively upbeat,” says Dyer.

Dyer speculates that while the recent US election results may have created uncertainty around future economic policy, more clarity will emerge once the new administration takes office. “On one hand, tax cuts and deregulation may drive growth but on the other, potential tariff hikes and immigration limits could increase inflation, restricting future interest rate cuts by the US Federal Reserve.”

Regardless of the outcome, Dyer believes that it is likely that the SARB will take a more cautious approach to the timing and extent of future interest rate cuts. “We do however hope that these considerations will not hinder the progress being made in the homebuying sector, and that rate cuts will continue into 2025 as initially projected.”

Homebuying market’s early response to rate cuts

As reflected in its October 2024 figures, Dyer shares that ooba Home Loans has already seen a positive response to the rate cut implemented in September.

“October marked the first significant shift in consumer demand for property, with home loan applications rising 16% compared to October 2023 and 27% on the previous month. This demonstrates the impact of even a single 25-basis-point interest rate reduction.”

Now totaling 50 basis points, the rate cuts in 2024 alone equate to monthly savings of R344 on a R1 million home loan, totaling savings of R82,683 over a 20-year home loan period.

“These savings are sure to stimulate home buying activity – especially among the prized first-time buyer segment – which is anticipated to drive the market’s recovery,” says Dyer pointing to a healthy increase in first-time homebuyers in September of almost half of total applicants – almost rising above the 50% mark for the first time since Q4 ’22.

The resilient nature of the country’s major banks, reflected in sustained competitive lending, is also paving the way to accelerated recovery. “Our Q3 ’24 data showed healthy increases in the average approved bond size (up by 6.3% on Q3 ’23) and loan to value ratios,” says Dyer.

“We also achieved an average weighted interest rate concession of prime less 0.55% last quarter – 11 basis points cheaper than Q3 ’23 – a clear indicator of the importance of using a comparison service like ooba to secure the best possible deal on a home loan.”

Putting savings to good use: Top tips for paying off your home loan faster

“We strongly advise that where possible, existing homeowners use the added savings to increase their home loan repayments,” says Dyer.

He shares his top four tips for paying off one’s bond sooner as follows:

1) Allocate Extra Cash

Shift funds from savings or fixed deposits to your bond to reduce interest and shorten your loan term. In emergencies, you can usually access these funds if needed.

2) Put extra money into your monthly bond repayment

Add a consistent extra amount to your bond payment each month to save on interest. “Whether it’s R100 or R2,000, allocating extra money can significantly reduce your loan repayment term.”

3) Apply raises and bonuses to your bond

“Direct a portion of any raises or bonuses toward your bond without increasing expenses,” says Dyer. “If you allocate 15% of your income to your bond, do the same with each raise.”

4) Use lump sums or windfalls to reduce your bond

Apply one-off cash, such as tax refunds or inheritance, directly to your bond. “For example, a R30,000 lump sum on a R1 million bond at 11.5% will save you R233,464 in interest and help to reduce your bond repayment term to 17.94 years.”

Looking ahead to 2025, Dyer strongly believes that despite international uncertainty following the US elections, South Africa is still well on its way to enjoying several more rate cuts. “We remain optimistic and anticipate further rate cuts early in 2025, driven by an improved local outlook” he concludes.

Seeff Property Group: More good news, rate cut welcomed for property and economy, but more needed

Samuel Seeff, Seeff Property Group chairman

Samuel Seeff, Seeff Property Group

The decision by the Reserve Bank to cut the repo rate by 25bps is welcome news for property and the economy, but more is needed, says Samuel Seeff, chairman of the Seeff Property Group. This brings the repo rate down to 7.75% and the prime rate to 11.25%.

This is the second successive cut, bringing the rate down by a total of 50bps this year. It follows the US Fed which in fact provided interest rate relief of 75bps, along with rate cuts by the BoE and EU Central Bank recently.

While welcomed, Seeff notes that the Bank missed an opportunity to provide a more meaningful 50bps cut and a real economic boost. Especially, given that inflation dipped beyond expectation to just 2.8% (from 3.8% in September), putting it below the target range of 3%-6%. It is also the lowest since the pandemic and below the pre-pandemic level of January 2020 when the prime rate was reduced to 9.75%.

While this rate cut is set to inject further energy into the housing market, Seeff says more is needed to kickstart the economy. It desperately needs growth and a push for jobs, and lower interest rates are needed to do that.

On the back of more positivity flowing from the GNU (Government of National Unity), the lower interest rate, lower inflation, and continued absence of loadshedding, the economy and property market is poised for growth, but can do with more rate cuts.

Seeff anticipates the residential property market to rerate in 2025. Where we’ve seen subdued or benign to no growth scenarios for many months, and years in some areas, he believes it will start turning next year in terms of higher volumes, price, and values.

Higher demand will therefore drive greater turnover in areas that have been in a slump for the last year and longer such as Gauteng, Gqeberha, Mpumalanga, Limpopo, and so on. Most of these areas sit with surplus stock, and while we anticipate higher sales volumes, Seeff says prices will only start rising once stock levels are reduced, he adds.

In contrast, we could arguably see price growth of up to 15%-20% next year in areas where there has been reasonable growth this year. These include mostly the Western Cape and other coastal regions where stock levels are depleting, and shortages are already becoming evident.

As a result of the 25bps rate cut, mortgage repayments will reduce by:

R750 000 bond – from R7 998 to R7 869 – thus saving R129
R900 000 bond – from R9 598 to R9 443 – thus saving R155
R1 000 000 bond – from R10 664 to R10 493 – thus saving R171
R1 500 000 bond – from R15 996 to R15 739 – thus saving R257
R2 000 000 bond – from R21 329 to R20 985 – thus saving R344
R2 500 000 bond – from R26 661 to R26 231 – thus saving R430
(Based on a 20-year repayment period at the prime rate)

Pam Golding Property: Further repo rate cut will provide impetus to housing market activity

Dr Andrew Golding, Pam Golding Property Group

With headline consumer inflation down to 2.8% last month (October 2024), which is significantly lower than 3.8% in September and the lowest since February 2021, the MPC was likely to reduce the repo rate by at least a further 25bps, says Dr Andrew Golding, chief executive of the Pam Golding Property group. This takes the prime rate to 11.25%, a level last seen in April 2023.

Says Dr Golding: “This second reduction in the repo rate will provide further impetus to activity in the housing market – particularly among first-time buyers – who had already begun responding positively to the previous interest rate cut in September (2024).

“There are already signs that demand from first-time homebuyers is recovering as price pressures subside and an interest rate-cutting cycle begins. Demand from first-time buyers soared in September, according to ooba Home Loans, as this sector is generally sensitive to interest rate movements and is likely to respond more positively to additional cuts.

“Lower rates make purchasing a home more affordable and also encourage those who would like to move for retirement, downsizing, and relocating for various reasons, who had paused potential acquisitions due to the higher interest rate environment, to commit to purchasing decisions.

“In Gauteng, for example, where house prices have been under pressure for some time, lower interest rates appear to have sparked a marked increase in activity – more so than in the Western Cape (according to the Q3’24 FNB Estate Agent Survey). Similarly, regions which typically have high levels of first-time buyer activity – such as the Free State, Mpumalanga and Gauteng South and East – are likely to benefit more from increased first-time buyer demand as housing affordability improves and young adults are able to shift from the rental market to purchasing their first home.”

“Furthermore,” says Dr Golding, “it is not only interest rates which are having a positive impact on the housing market. Improved confidence in the wake of the formation of the GNU and easing price pressures – particularly repeated cuts in the petrol price – are all contributing to an easing in financial pressure on households, coupled with increased market sentiment, thereby reviving demand from buyers across all sectors of the market, including the luxury market.

“A series of petrol price cuts have also played a key role in dampening overall price pressures. While the November increase in fuel prices was a temporary setback, initial indications are for a major R2 per litre drop in prices in December (2024), which will reinforce the current easing in prices.

“The inflation rate is forecast to remain anchored around the Bank’s 4.5% target during the next few years, which should ensure there is sufficient scope for further interest rate relief. However, this will be very data-dependent and there are a number of potential factors which could change the outlook.

“In addition to the good news on the inflation front, the prospect of a further significant petrol price cut in December will offer considerable relief to consumers as well as help to further dampen price pressures.  A further positive is that international ratings agency S&P Global has noted that the GNU has resulted in an improvement in SA’s economic outlook due to the more rapid implementation of structural reforms, while the Treasury remains committed to fiscal consolidation.

“As a result, the agency changed SA’s outlook from neutral to positive, which is seen as the first step towards a ratings upgrade. A return to investment grade rating would likely take several years, but this initial step is encouraging, and further progress will be made as long as growth improves and Treasury keeps a tight grip on government finances.”

Dr Golding concludes: “There are likely to be additional interest rate cuts during the course of next year, with a total of around 100bps anticipated in additional relief in 2025 – including this week’s 25 bps rate cut.”

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