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The Monetary Policy Committee has decided to keep the repo rates at their current levels, according to South African Reserve Bank governor Lesetja Kganyago. This follows the Reserve Bank’s previous decision in July to cut the rates by 25 basis points. Currently, the repo rate is at 6.75%, with the prime lending rate at 10.25%.
The decision to retain the repo rate is disappointing for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group. At a time of poor business confidence and weak economic growth marred by political instability, a further rate cut would have been an important boost for consumers and the market.
While the overall property market remains in a much better place compared with the 2007/8 Global Housing Crisis, Seeff says that it is becoming harder for agents to close deals. Properties are taking longer to sell and buyers are hesitant. Serious sellers need to revisit their price expectations.
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, agrees: “With waning consumer confidence, property transactions will remain constrained even with the expected seasonal upturn in the warmer seasons. Until there is improved economic growth and higher numbers of consumers with the required affordability ratios necessary to purchase property, the property market will remain restrained.”
South Africa’s housing market would have benefited if the Monetary Policy Committee had decided to further reduce the repo rate rather than keep the rate on hold, says Andrew Golding, chief executive of the Pam Golding Property group.
But, during times of intense economic and political uncertainty, he notes, investors often tend to favour assets such as property. “Not only do bricks and mortar assets offer the prospect of secure capital appreciation, but also the potential to generate a steady income stream, which is particularly welcome during uncertain times,” says Golding.
“Interestingly, as the global reputation of South African cities continues to grow, the performance of some local metro housing markets may well begin to uncouple from local economic and political developments.”
Words: Property Professional
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