This week''s 100 point repo cut reduced the rate to 4.25%, its lowest in almost 50 years, offering those looking to buy property a great opportunity.
The last time the country experienced a similar rate was in July 1973, says Bryan Biehler, managing director and co-owner of Huizemark. Not only does the move open doors for those wanting to buy as a long-term investment but, given today’s property stock levels, plus the lowered borrowing rates announced during this year’s State of the Nation address, it provides a proverbial silver platter for others.
“Those who were maybe looking at buying in specific neighbourhoods, but couldn’t afford the price tag, or those who were renting, unable to afford to buy, may well be able to consider putting in offers to purchase.
“Given the bond rate reductions over the last two months, homeowners can save around R1 275 per month on a bond of R1 million.” Biehler says the cut comes at a time when both the property market and the economy could do with this type of stimulus – the nation needs to plan its recovery phase.
The cut takes the prime lending rate down to 7.75%, which Carl Coetzee, chief executive of BetterBond, describes as welcome news for the property sector.
Echoing Biehler, he says: “Any measures seeking to stimulate the market and ease the financial burden on the consumer’s pocket is a step in the right direction to buoy the property market.”
But while the drop in the repo rate is a good start, he believes additional strategies must be put in place to secure the industry’s long-term survival.
“One measure could be to suspend transfer duty on property valued to a certain amount. Raising the transfer duty threshold, currently at R1 million, to R3m for a limited period, say six months, with an option of reviewing after six months, could mitigate the risk of the industry contracting significantly as we start what is sure to be a slow economic recovery.”
Coetzee says savings to the buyer could mean a difference between confidence and the financial means to buy property, while the government’s loss of income is set to be relatively low over the proposed six-month period.
“Government revenue is likely to be matched by benefits gained on collecting tax on the earnings of all players within the property industry, even the capital gains payable on properties sold, if such a stimulus measure was implemented.”
He says a second measure which might go a long way to keeping the property sector ticking over is to reopen deeds offices nationwide during lockdown, albeit at reduced capacity.
In the meantime, Mike Greeff, chief executive of Greeff Christie’s International says now is an “ideal time” for potential buyers to continue their hunt for property – not only because of the low interest rate but also as they are able to spend more time canvassing online sites for properties that meet requirements.
“Like all industries, the property market has faced its fair share of disruption throughout this period but the demand to transact, from both buyers and sellers, has shown no signs of slowing.”
Property is a long-term investment and even though it goes through ups and downs, it remains a solid investment over time, notes Colin Anderson, chief operating officer at the Rabie Property Group.
What the property industry does like no other is the creation of cities, upgrading of neighbourhoods and upliftment of communities. “It’s the catalyst for infrastructure, business expansion and provides improved living conditions. It’s so much more than bricks and mortar.”
Echoing this, Brad Morgan of Rawson Developers says property is a resilient asset class. He is confident demand for property in the R1m to R4m bracket will “be back on track quite quickly”.
“We still are receiving many inquiries but buyers seem to be waiting for some certainty on what is happening before making commitments. This pent-up demand, combined with the drop in interest rates, should result in a quick recovery in terms of sales.”