The repo rate drops to 6.25% and the prime lending rate changes to 9.75%. Property players have welcomed the move and commended the MPC for its decision.
“The MPC has acted prudently by seizing this opportunity to further stimulate our economy by announcing a cut in interest rates at this time,” says Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa. This decision will also have positive consequences for the housing market, he says.
“The cut will provide further relief to homeowners who are battling to keep up with their monthly repayments, thereby lessening the number of homes that will enter the market and evening out the scales of supply and demand.
“Lower interest rates are likely to incentivise consumers to take on debt, which should, in turn, increase the number of buyers looking to purchase property over this time. I therefore remain hopeful that this announcement will translate into some corrective growth for the housing market.”
The cut also assist sellers as it offers them a better chance to secure a sale timeously and at the full asking price while buyers will enjoy lower instalments on their bond repayments, Goslett adds.
The South African Reserve Bank’s decision is coupled with a lower rate of inflation than this time last year and so Mike Greeff, chief executive of Greeff Christie’s International Real Estate urges home owners to continue paying their previous instalment amounts, and even more if possible. This will help them save on interest and shorten the pay back period.
“The lower repo rate also means that banks are likely to be more and more lenient when approving bonds. This means that buyers will be able to commit, especially since property prices have levelled off in several areas, and we have now definitely shifted into a buyer’s market…
“Those looking for an investment property to rent out would do particularly well to purchase now, as incoming rental can stretch further to assist in paying off the interest bearing portion of a bond,” he says.
With limited, modest growth anticipated for the year ahead, Andrew Golding, chief executive of the Pam Golding Property group says it is encouraging that the MPC saw fit to reduce the rate in order to help kick-start the economy and foster increased confidence among consumers who are feeling the pressure of ever-rising costs.
He says the decision is particularly welcome given the heightened uncertainty ahead of the 2020 budget speech and likely downgrade of South Africa’s credit rating to junk status by Moody’s in March.
Yet while the decision has been welcomed, Samuel Seeff, chairman of the Seeff Property Group says more is needed. The Reserve Bank’s stance has been “too conservative” over the past year “at the expense of the economy and property market”.
“Consequently, it missed at least two, possibly three opportunities to cut the rate given that inflation has remained well within the target range for most of last year while the currency remained reasonably stable, and in fact improved.”
He says the country needs “at least” a further 50bps to 100bps cut from the interest rate during the first half of 2020 to restore confidence and provide vital impetus for the economy.
“Consumers are under enormous pressure and a rate cut will put some money back into household budgets and boost important economic sectors including retail and housing.”