AF - 2020

Author:  PropertyWheel_G
16 January 2020


Samuel Seeff, chairman of the Seeff Property Group:
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.”

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.”

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“.

We need to see at least a further 50-100 basis points cut from the interest rate during the first half of 2020 to restore confidence and provide vital impetus for the economy, he says further. 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“.

While the property market has continued ticking over, carried largely by the low to mid-market residential sector, it remains lacklustre. Save for the odd high value sale, the overall sense is that sales volumes remain muted as a lack of confidence continues to hold buyers back“.

The Seeff group believes that there is a strong desire to invest in the property market and we anticipate 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”

Adrian Goslett, Regional Director and CEO of RE/MAX Southern Africa:
We commend the MPC for making the decision to lower interest rates at this meeting. The MPC has acted prudently by seizing this opportunity to further stimulate our economy by announcing a cut in interest rates at this time.”

This 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.”

If you are a seller, this announcement provides a better chance of securing a sale timeously and at the full asking price. If you are a buyer, it means that you will enjoy lower installments on your bond repayments over this period. If you have no plans of buying or selling your home before the next MPC meeting next year, it means that you will either have some cash to spare thanks to the money saved on your monthly installments, or the opportunity to save on interest charges and shorten the lending term by keeping your repayments the same as they were before the interest rate cut happened.”

Interest rates change depending on the economy’s performance which is ever-changing and easily influenced by external factors. This makes it difficult to predict how long we will enjoy the current interest rates. I would, therefore, encourage all South Africans to speak to a trusted real estate advisor or financial planner to find out how they can be maximising on the current rates while they last.

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.”

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.”

Mike Greeff, CEO of Greeff Christie’s International Real Estate:
The South African Reserve Bank has lowered the repo rate and this is a hugely welcome move for the property industry. This coupled with inflation at a lower rate than last year at this time, theoretically means that those currently paying off bonds should make a huge effort to pay the installments they were previously paying into a bond, and even a little bit more if possible every month in order to save on interest and shorten the ultimate payback period“.

The lower repo rate also means that banks are likely to be more and more lenient when approving bonds, and this means that buyers will be able to commit, especially since property prices have leveled off in several areas, and we have now definitely shifted into a buyer’s market making this an ideal time to purchase property. 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.”

Carl Coetzee, CEO of BetterBond:
We welcome a drop in the repo rate as we believe it to be exactly what our stagnant economy needs in order to stimulate growth.”

In the buyer’s market that we’re currently experiencing, a lower interest rate makes property more affordable and thus more accessible to more buyers, particularly those looking to enter the market for the first time,” Coetzee explains.

“In light of this good news, we want to encourage buyers to take advantage of the situation by investing in property.”

Crispin Inglis, CEO of PropertyFox:
PropertyFox welcomes the reduction in the repo rate as it will favourably impact the lending rate for consumers. With financial institutions already jostling for business, this should make it slightly easier for consumers to get financing. In the current stagnant sellers’ climate, we are seeing homeowners come to terms with the fact that many homes haven’t seen the anticipated growth in value. An oversupplied market also means many are more willing to negotiate rates. This is good news for prospective buyers, especially first time buyers!

Original article:  view here