The South African property market has welcomed the Reserve Bank decision to cut the repo rate by 25 basis points however argued that more was needed.
The decision by the Reserve Bank’s Monetary Policy Committee to cut the repo rate by 25 basis points to 6.25% (from 6.5%) reducing the mortgage rate to 9.75% (from 10%) is welcomed, but we need more, says Samuel Seeff, chairman of the Seeff Property Group.
Seeff says the Reserve Bank’s stance has been too conservative over the last 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.
He asserts that the sentiment boost of a rate cut should not be underestimated. “South Africa’s interest rate is higher relative to the rest of the world and out of step with the economy which is struggling while consumer and investor confidence is at record-low levels. We have been in a holding pattern for about eighteen months and it is time for decisive action from the Reserve Bank to take responsibility and provide support for the economy.”
Contained inflation made the case for an easing in the repo rate – Dr Andrew Golding, chief executive of the Pam Golding Property group.
“With limited, modest growth anticipated for the year ahead (2020), it encouraging that the Monetary Policy Committee saw fit to reduce the repo rate by 25bps in order to help kickstart the economy and foster increased confidence among consumers who are feeling the pressure of ever-rising costs.”
So says Dr Andrew Golding, chief executive of the Pam Golding Property group, who adds that contained inflation, which is currently close to the lower limit of the Reserve Bank’s inflation target, further made the case for an easing in the repo rate.
With subdued growth and muted inflationary pressures, the Reserve Bank’s decision is welcome – particularly given the heightened uncertainty ahead of the 2020 Budget speech and likely downgrade of SA’s credit rating to junk status by Moody’s in March.
“Yet despite the ongoing economic challenges faced, including the reintroduction of load shedding, we continue to see signs of green shoots in the residential property market place.
“Having experienced a period of correction in regard to house prices, first-time and a mix of other home buyers are seeing the market in a positive light, further buoyed by financial institutions’ robust appetite for lending. This is enabling more aspirant buyers to gain a foothold on the property ladder.
“Pockets of solid activity are evident in all markets, for example metros where demand is outstripping supply, including coastal markets and secondary coastal towns, but particularly frontline coastal property which has consistently retained value, as well as commuter belts which have high appeal for those seeking a convenient live, work, play lifestyle.
The Seeff group believes that there is a strong desire to invest in the property market and he anticipates an increase in demand this year, but without a push volumes are likely to continue primarily in the low to mid-market price bands to around R1,8m (R3m in some areas).
The challenge of a slow market is that buyers are struggling to sell their homes in many areas which affects their ability to buy and move up, says Seeff further. Volumes therefore remain under pressure despite the favourable buying conditions which is now boosted further by a degree of seller fatigue and a readiness to negotiate and sell.
For the economy and property market to start moving meaningfully, it needs a decisive stance and push which in large part needs to come from the Reserve Bank. We simply can no longer afford this “wait and watch” stance, concludes Seeff.