South Africa\u2019s real estate industry welcomed the rates cut and urge home owners to save any savings brought about by this for future investments.<\/p>\n
The Monetary Policy Committee of the SA Reserve Bank announced on Wednesday 28 March that the repo rate will be cut by 25bps from 6.75% to 6.50%, taking the base home loan rate from 10.25% to 10%. The inflation is at around 4% which is within the Reserve Bank\u2019s target range of 3-6%.<\/p>\n
Financial experts expected a lower interest rate\u00a0following the recent announcement by rating agency Moody\u2019s to keep SA\u2019s sovereign credit rating at one notch above junk status and upgrading the economic outlook from negative to stable. Many things have happened to help restore investor confidence since Moody\u2019s investors last sat to evaluate our credit rating, among them the election of Cyril Ramaphosa as president, the action around state capture and the reshuffling of the cabinet.<\/p>\n
Leaders in the real estate industry applauded the rate cut as especially welcome news, considering the added pressure brought on consumers by the 1% VAT increase and fuel\u2019s hefty price increase in April<\/p>\n
Samuel Seeff, chairman of the Seeff Property Group said this will provide much needed stimulation for the market and, after a very flat 2017, will hopefully be an energy boost to encourage buyers and investors. While the outlook for 2018 is much better than last year, it remains largely a buyers\u2019 market for the time being and sellers need to maintain a more conservative approach to their price expectations.<\/p>\n
On the upside, the last year has seen lots of new stock come onto the market and Seeff said that it is an excellent time to buy property, especially if it is your primary home. Prices have remained fairly flat over the last 12-18 months as the market took a breather and there are many motivated sellers. This interest rate cut is a great incentive for hesitant buyers and there is no reason to wait, it is a good time to buy, he added.<\/p>\n
Herschel Jawitz, CEO of Jawitz Properties, also welcomed the news saying despite the looming increase in VAT and the petrol price levy, consumer confidence will receive a much-needed boost from the rate cut. The impact of the rate cut will be a decrease of R170 per month on a million rand bond over 20 years.<\/p>\n
\u201cAccording to the latest FNB Research, South African consumers are in a better financial position in terms of debt to income levels, which will be further improved by this rate cut. Even with improved sentiment because of \u2018Ramaphoria\u2019 the residential market remains sluggish with sales volumes tight and property price growth flat. The rate of mortgage lending from the retail banks has improved as has the average rate concessions given to buyers, which will be helped by the rate cut,\u201d he explained.<\/p>\n
Jawitz concluded: \u201cThe rate cut will certainly give buyers more food for thought, however, it will still be some time before the imbalance between supply and buyer demand translates into better price growth. Improved consumer and business confidence will continue to be the key driver in the recovery of the residential market.\u201d<\/p>\n
Bruce Swain, CEO of Leapfrog Property Group encouraged homeowners to save the savings this cut provides. \u201cThe recent VAT increases, although arguably necessary, has put further pressure on home owners, many of whom are already under financial strain. As such we welcome the decision by the SARB Monetary Policy Committee to lower interest rates by 25 basis points. While it is not a significant cut, having the repo rate at 6.5% and prime lending at 10% will offer some relief to home owners. \u00a0Our advice would be for people to save the savings this cut provides so as to weather any hikes in the future or to pay the extra funds into their home loans as opposed to spending it now,\u201d said Swain.<\/p>\n
Adrian Goslett, Regional Director and CEO of RE\/MAX of Southern Africa also applauded the news and that any savings because of the cut be saved for future investments.<\/p>\n
\u201cI think now was the perfect opportunity to stimulate the economy with a rate cut. Leading up to today, there have been many encouraging signs and consequent offshoots that have impacted the economy positively. We applaud the decision of the monetary policy committee to make the cut, as we believe that this will continue to stimulate growth and strengthen investments,\u201d he said.<\/p>\n
\u201cThe rates cut provides consumers with some much-needed financial relief. Shrewd citizens will use this opportunity to save for future investments, or reroute the money they\u2019re saving straight back into their bond repayments,\u201d Goslett advised.<\/p>\n
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