Seeff slams premature rate hike – “priority must be growth over temporary volatility”

The Reserve Bank’s decision to increase the repo rate by 25 basis points to 7% (prime to 10.50%) is premature and a blow to the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group. He expands below:

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The hike will unnecessarily penalise consumers and hamper economic recovery for what is clearly a temporary spike in inflation, driven by external factors rather than domestic overspending, he says.

At 4%, the inflation rate is only just at the upper end of the Bank’s 3-4% target range while the Rand has remained stable below R17.00 to the USD. This, says Seeff, provided sufficient room to keep the rate unchanged for the sake of economic stability and growth.

The temporary nature of the inflation blip should also have been considered. It was entirely expected and less severe than anticipated. Fuel prices and inflation will come down again. Given the missed opportunity to cut the rate in January, the rate should have been kept unchanged.

Consumers and the economy are already struggling under the weight of high interest rates and the burden of fuel price hikes and other cost increases. Further pressure on disposable incomes only exacerbates the current economic challenges while impeding recovery.

Seeff reiterates that economic stability and growth must be prioritised and facilitated wherever possible. The first-quarter job losses (taking unemployment to a disastrous 32.7%) and fading economic optimism which has already seen the GDP growth outlook downgraded to around 1.2% from an initial 1.6%, must be a priority at this stage.

The property market also seems to have lost momentum from the end of last year, largely due to the expected January rate hike not materialising. Overall, he says, despite the rate cuts over the last two years, the market remains around 20% below the 2021/2 highs.

Higher interest rates and weakened disposable income affect buyers’ ability to enter the market, especially first-time buyers where we continue seeing the average age increasing rather than reducing, he says further.

Buyers and investors want a stable environment with predictable interest rates, not a situation where rates are hiked unnecessarily and do not come down when they should.

That said, Seeff says the market continues to offer good opportunities for buyers and sellers. Despite the hike, the interest rate is still well below what it was two years ago, and the general mortgage lending environment remains hugely supportive of the market. ooba recently reported approval rates of around 84%, lower deposit requirements (12.8% from 15.4%), and rate concessions still attainable. Buyers should take advantage where they can, concludes Seeff.