EDITED BY THE EDITORIAL TEAM :: PHOTOS UNSPLASH AND SUPPLIED
Property professionals welcome the Monetary Policy Committee’s decision to keep the repo rate unchanged at 8.25% and the prime lending rate at 11.75%.
The country is breathing a collective sigh of relief after news broke that the Monetary Policy Committee (MPC) is keeping the repo rate steady.
“With inflation easing to 5.4% in June, significantly down from 6.3% in May and now comfortably within the Reserve Bank’s 3-6% target range, the MPC’s decision was well justified,” says Dr Andrew Golding, chief executive of the Pam Golding Property group.
Positive news for new buyers
Golding says it is encouraging news for current and new mortgage holders and hopefully signifies “a shift towards a stable repo rate and the start of a downward repo rate cycle in 2024”.
He says to keep the repo rate steady is “particularly motivating for aspiring, first-time home buyers, whose appetite for home ownership remains consistent, while the banks continue to offer attractive pricing, with the first-time buyer mortgage approval rate ticking higher to 81.2% in June – according to ooba’s statistics”.
Dr Andrew Golding
Call to lower interest rate
Samuel Seeff, chairman of the Seeff Property Group, agrees saying the decision is a welcome reprieve for the economy and property market. “The interest rate is already too high and has been stymieing economic growth and driving unemployment and higher debt levels and it has done more harm than good. The bank should now lower the interest rate,” he says.
Although the market is challenging for sellers and first-time buyers, there is an upside. “We are now in a buyer’s market,” he says. “For buyers, this could be one of the best times to buy with prices trading relatively flat while the banks are still lending, albeit that buyers must now budget for the higher interest rate.”
Samuel Seeff
No quick fixes
Although welcoming the unchanged repro rate, Leonard Kondowe, Finance Manager for Rawson Finance, says South African homeowners potentially has a long road ahead. “Inflation has slowed over the course of May and June to fall within the upper limits of the SARB’s inflation target for the first time in over a year,” he says. “However, global inflation and the weak rand also play an important role in the MPC’s interest rate decisions. As such, it’s unlikely that we will see monetary policies easing until things are looking more positive on these critical fronts. That could take some time, judging by current conditions. “Bond repayments have risen faster on previous rate hikes which have been higher than anyone expected, and salaries haven’t come close to matching those changes. It has put a lot of homeowners under unexpected – and growing – financial pressure.”
Leonard Kondowe
A good starting point
CEO of Lew Geffen Sotheby’s International Realty says ten successive rate hikes have hurt the market, and it shows particularly in the drop in first-time home buyers –those under the age of 35.
“Lightstone data released last month showed that property transfers (of properties transacting for more than R20,000) to buyers below the age of 35 over the past ten years have declined from 87,675 (45%) in 2012 to 81,519 (40%) in 2017 and 69,304 (38%) in 2022. “This is the population segment of investors that should be growing –our home owners of the future. When young buyers can’t afford to get a foot on the property ladder, it shows an economy that’s in trouble.”
Geffen says while the unchanged prime lending rate announcement is extremely good news, the country is far from out of the woods.
“We need the government and the Reserve Bank to work harder to affect a real and lasting economic turn-around. Food price inflation is still too high, the cost of electricity is huge and grid instability is a grave threat to the country as a whole. “This announcement is a good starting point, but we need prime lending rate stability for the remainder of the year, at least, and for the other currently dysfunctional moving parts to be fixed.”
Yael Geffen
The eleventh hour
High Street Auctions Director Greg Dart says the unchanged repo rate is the best news South African consumers and the property industry has received in more than 18 months. “An 11th successive rates hike would have been a step too far for South African consumers battling on already tight household expenditure,” he says.
In a recent interview Finance Minister Enoch Godongwana said the Reserve Bank would base its prime lending rate decision on what was necessary to curb inflation. Thankfully, the latest figures from Stats SA were good.
“On Tuesday, Statistics SA reported that consumer price inflation had slowed dramatically to 5.4% in June from 6.3% in May. This is the first drop below the Reserve Bank’s maximum target of 6% since April last year,” he says. “The currency’s performance has also improved, although this has more to do with a cooling of the US dollar than a strengthening rand.”
Greg Dart
