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Property professionals weigh in on the Reserve Bank’s latest repo rate announcement.
Having seen the Reserve Bank raise the repo rate by a total of 475 basis points between November 2021 and May 2023 – taking it to 8.25%, and with the current prime lending rate at 11.75%, the most recent announcement that the interest rate remains stable provides a welcome boost for home buyers and those with mortgage debt, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
Dr Andrew Golding
“During the above period, the consumer inflation rate has declined from a peak of 7.8% in July 2022 to 4.7% in July 2023 – marginally above the mid-point of the inflation target, and although inching slightly higher in August to 4.8%, it remains well within the inflation target range of 3-6%,” says Golding.
He remains positive about the residential property market outlook, and says he sees the start of encouraging, albeit modest, signs of an upturn in the market.
Don’t celebrate yet
Lew Geffen Sotheby’s International Realty CEO Yael Geffen says she shares the country’s relief that the MPC decided to leave the repo rate unchanged for the second consecutive meeting, but isn’t quite ready to break out the champagne.
“The fact that two MPC members voted for an increase of 25 basis points on top of the Reserve Bank Governor’s consistent caution about South Africa’s economic position point to the inescapable conclusion that we’re not quite out of the woods.
Yael Geffen
“It’s likely that before the end of the year we’ll see one further increase that will hopefully be no more than 25 basis points. The MPC meets again at the end of November, which doesn’t bode well for the festive season.
“There’s also no escaping the fact that South Africa’s economy is very closely tied to America. Yesterday the Federal Reserve kept its rate unchanged as well, but indicated it expected one more hike before the end of the year. I expect we should brace for the same.”
High hopes
Carl Coetzee, CEO of BetterBond had hoped the Reserve Bank would drop the repo rate this week. However, he says homeowners can take comfort in knowing that the decision to hold the repo rate steady at 8.25% is a strong signal that we are close to the peak of the rate-hike cycle, and that the interest rate is likely to drop from early next year.
Tyson Properties’ chairman, Chris Tyson, and chief executive, Nick Pearson, have welcomed the decision to keep the key repo rate unchanged at 8.25%. Although this means that the prime lending rate remains at a 14-year high of 8.25%, both Tyson and Pearson said that the decision not to further increase the repo rate would provide more stability for South Africa’s property market and give the country’s consumers some respite from the increasing cost of financing important assets like properties.
“While it cannot be denied that South Africans still have to contend with a high cost of living, rising fuel prices and increased load-shedding over the months of September and October, this latest decision by the Reserve Bank is definitely a move in the right direction,” says Tyson. “I foresee the rate being held now for the remainder of the year with, perhaps, even a slight drop in the new year.”
Samuel Seeff
Boost needed
Samuel Seeff, chairman of the Seeff Property Group says the unchanged rate is welcome news, and the correct decision for the economy and property market. He says stability is now vital for the economy and that the Reserve Bank cannot possibly contemplate any further rate hikes. “As it is, we have already passed a point of tolerance and can see the impact of the higher interest rate on the economy and property market.
It is exerting unnecessary pressure and essentially punishing consumers for something beyond their control. After three years of economic stress, we cannot endure any more. The economy needs a vital boost, and if anything, we would like to see a 25bps drop in November ahead of the retail season.”
Tony Clarke
Tony Clarke, MD of the Rawson Property Group says the most recent Monetary Policy Committee announcement of zero change to the current interest rate has property owners around the country breathing a collective sigh of relief. General consensus from economists is that this announcement signals the end of the current rates hike cycle, which saw the prime lending rate climb a full 5% (from 7% to 12%) in the space of just two years.
“This has been an exceptionally tough time for South Africans, and property owners in particular,” he says. “Pegging interest rates at their current levels may be a more conservative approach than many hoped for, but it’s definitely a step in the right direction for the property market.”
Greg Dart
More headwinds expected
High Street Auctions Director Greg Dart has welcomed the decision to leave the repo rate unchanged at 8.25% following the MPC’s meeting this week. At the same time, he warned that economic recovery would not happen overnight and that consumers could well see another interest rate hike before the end of the year. “In the property sector, industrial and retail are still strong. The Cape region in particular, is booming cross the board.
“My advice to property investors right now is to double down on due diligence. Know where your money is going, and which sectors are delivering returns. The smart money isn’t in speculation.”
