Samuel Seeff, chairman of the Seeff Property Group:
“The decision by the Reserve Bank’s Monetary Policy Committee to cut the repo rate by 100 basis points to 5.25% (from 6.25%) reducing the mortgage rate to 8.75% (from 9.75%) is a welcome stimulus for the economy and property market.“
“This cut will help when the recovery starts … it takes the interest rate down to levels last seen in the 2012/3 period and is at one of the lowest levels in decades. It is in keeping with global developments given that the world economy is now in recession and potentially facing a similar situation to the 2008 Global Financial Crisis“.
“Central banks across the world have responded with aggressive rate cuts and the US Fed has just provided a second emergency cut bringing rates down to near-zero and launching an aggressive economic stimulus package“.
“Given that SA does not have the reserves to match any such stimulus and is fiscally under massive pressure, it is necessary for the Reserve Bank to come to the aid of the economy and provide assistance to South Africans … the Bank’s stance over the last year has been too hawkish with only two 25bps cuts despite there being ample reasons and calls for more aggressive cuts to boost the economy”.
“This cut will provide much needed relief for households and small businesses and aid those with debt and home loans. It will provide a vital boost for the property market. Contrary to expectation, the market has been active this year and people have continued buying … we will need to wait and see what effect the crisis will have.“
“This year has seen more commitment from buyers looking to take advantage of what is the best buyer’s market in a decade while sellers who had been holding out are now showing some urgency. The rate cut will provide additional stimulus for buyers who might still be sitting on the fence to take advantage of the favourable buying conditions“.
“In addition to the affordability boost, the savings puts extra money into buyer’s pockets which can assist with transfer duty and costs which will result in more transfer duty revenue for government and increased economic activity“.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett:
“Ongoing load shedding and global panic around the coronavirus is grinding the South African economy to a holt. GDP has already contracted by 1,4% in the fourth quarter of 2019 and grew by a dismal 0,2% in 2019. Especially after the US Federal Reserve cut interest rates on 3 March to stimulate their local economy, I remained hopeful that interest rates would drop to align with international standards. It is encouraging that the MPC has made the decision to lower interest rates at this meeting, as this will help towards keeping our economy somewhat stable over this time.”
“Lower interest rates usually incentivise consumers to take on new debt. However, given our current economic outlook, it would be wiser for consumers to use this break to keep up with the repayments on their existing debts. When an economy shrinks, debt becomes increasingly expensive, along with all other consumable goods and services. Despite the interest rate cut, consumers should, therefore, think carefully before taking on any bad debt during this time,”
“Property investments, on the other hand, are a form of good debt that will generate high returns in the long run. The interest paid on this kind of debt therefore justifies the expense. Rather than taking on bad debts, homeowners can take advantage of the interest rate cut by redirecting the money they’re saving straight back into their home loan. This will save them on interest charges and reduce their home loan period by months or even years,” Goslett concludes.
Dr Andrew Golding, chief executive of the Pam Golding Property group:
“The ensuing reduction in the interest rate, coupled with next month’s (April) likely substantial drop in the fuel price as a result of the dramatic reduction in global oil prices – despite the additional 25c a litre tariff increase as announced in the recent National Budget, affords some relief to South African consumers and hopefully part of the boost our economy needs right now“.
“Given the extreme volatility currently being experienced in global stock markets, it is probable that, as has been seen over decades in times of great turmoil, we will see increased confidence in bricks and mortar among investors and home buyers“.
“As property has over the longer term proven a sound investment, it stands to reason that many will regard the residential property market as a safe haven amid the heightened economic uncertainty caused by a global pandemic.”
Looking at the recent past, according to the Pam Golding Residential Property Index, while national house price inflation continues to slow – to 1.95% in February 2020, house price inflation in Gauteng appears to be stabilising at 1.91% while both the Western Cape and KwaZulu-Natal housing markets continue to rebound at 5.36% and 3.12% respectively.
Positively, says Dr Golding, and on the back of the adjustment in the transfer duty threshold for zero payable on homes up to R1 million, the percentage of home loans extended via ooba to first-time buyers rose to 52% in February (2020), the fourth consecutive month this has exceeded 50%.
“Furthermore, 60% of all applications received by ooba are from buyers with no deposit, with four out of five buyers successful in their bid to secure a 100% bond. On average, mortgages facilitated by ooba accounted for 89.6% of loan value in February, the highest percentage on record (since 2007). In addition, loans extended for holiday homes recovered further last month (0.3%), while mortgages for investment properties rebounded to 7% of all mortgages facilitated by ooba from a weak January 2020“.
“But all of this may be academic as we head into the unchartered territory of a Coronavirus affected world and where we will have to see its effects on the property market both in short and medium term as it unfolds”.
Adds Dr Golding: The Reserve Bank will undoubtedly continue to closely monitor developments in the local economy, and will presumably stand ready to cut interest rates further should the need arise.
Marcél du Toit, CEO, Leadhome:
“We believe that the cut of 100 basis-points is necessary and will support much needed economic growth. While the rate has not been cut at sequential meetings since 2010, there are pressures for the bank to ease monetary policies.“
Tony Clarke, MD of the Rawson Property Group:
For existing homeowners with bonds, the repo rate drop will mean a reduction in their monthly installments of R65 per R100 000 outstanding – or R650 per month on a R1m bond.
“This is a significant amount and we would urge those who can afford to do so to keep paying their current monthly installment as long as they can, to reduce the capital amount owing on their bond, pay their homes off faster and save on interest.”
“So our advice now would definitely be not to buy a bigger home or take out a bigger loan, but to give yourself plenty of leeway to afford an increased monthly installment should rates start to rise. In the meanwhile, if you do have any extra cash available because your other monthly repayments have gone down, use it wisely to pay off as much debt as you can.”
“But combined with the tax cuts announced earlier this year and the large drop in the petrol price expected in early April, it will do a great deal to keep inflation at reasonable levels despite the drop in the Rand exchange rate. That will help many families to keep their heads above water while we wait to see what the final effects of the Covid-19 pandemic will be on the global economy and our own. It will also boost consumer confidence, which is a key factor in maintaining positive momentum in the real estate market.”
Source: Propertywheel.co.za | https://propertywheel.co.za/2020/03/the-property-industry-comments-on-sarbs-recent-repo-rate-decision/