Repo rate cut brings welcome relief for home owners
“Interest rate decrease could have a positive impact on the property market”
South African Reserve Bank governor Lesetja Kganyago announced on 20 July that the interest rate will decrease by 25 basis points, bringing the repo rate down to 6.75% and the prime rate down to 10.25%.
Says Andrew Golding, chief executive of Pam Golding Properties: “Consumers could use some positive news right now and this downward shift, albeit only a quarter of a percent, is important as it sends a positive signal to the market and hopefully heralds the start of a downward shift in the interest rate cycle. It will also impact favourably on market sentiment and activity in general.
Mike Greeff, CEO of Greeff Christies Real Estate, says: “For those with home loans, the drop will translate into a decrease of R16 for every R100,000 loaned. Alternatively it means that borrowers who are able to maintain their current repayment levels will be able to cut 12 months off their overall loan repayment period and save a formidable R81,000.”
Golding says there are two main segments that currently form the backbone of market demand: first-time buyers and those seeking sectional title properties. “Top performing sectors at present include the lower priced band under R1m and the smaller two-bedroom sectional title market, both of which reflect the consistently strong demand from first-time buyers. Over and above this, steady activity continues in the middle and luxury segments of the market.”
Whether the rate cut will stimulate the property market remains to be seen, says Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa. He notes that uncertain policy and recent credit downgrades have negatively impacted consumer confidence, which has slowed the market in most areas of the country.
Says Goslett: “During Q2 2017, the average price of freehold property declined from R1,161,481 to R1,139,604. The muted inflation of freehold homes can be largely attributed to the slower South African economy and rising unemployment rate.” Samuel Seeff, chairman of Seeff Properties, notes that overall the market is slower with fewer sales, properties are spending longer on the market, stock levels are rising and price growth is slower and stalling in most areas outside of the Cape.
Seeff renewed his call on the country to get its house in order.
“The lack of action and economic and political will is disappointing in view of the continued business confidence and economic decline.”