The South African Reserve Bank has announced a further reduction in the repo rate by 25 basis points. This brings the prime interest rate down to 7%.
Dr Andrew Golding, Chief Executive of the Pam Golding property group says that the Reserve Bank had room to adjust the rate, given that the consumer inflation rate slumped to 2.1% in May – the lowest in almost 16 years (since September 2004). Furthermore, price pressures have been subdued for some time now, with the inflation rate at, or below, the midpoint of the 3-6% target for 18 consecutive months.
“From an overall residential housing market and Pam Golding Properties perspective, we’ve seen the meaningful reduction in the repo rate for the year to date having a positive impact on demand – particularly in the lower price band below R2 million, where we are experiencing a high uptake among first-time and other buyers and investors. However, we are also successfully concluding sales in the middle to upper price bands, especially from R2 million to approximately R5 million.”
Samuel Seeff, chairman of the Seeff property group says this is a welcomed relief for the property market and households.
While welcomed, Seeff remains of the view that the bank should be taking a more aggressive stance with deeper cuts to boost the economy and property market during this unprecedented economic recession. People are not spending and the economy is simply not moving. More needs to be done to give momentum to the economy and property market.
“As expected, property has rebounded on pent-up demand under Level 3 with keen buyers who had been waiting to take advantage of the favourable conditions eager to physically view properties and get their offers in. For many areas, it has been the busiest period this year, and in some instances, activity has been on par with the same period last year, but it is vital that we keep the momentum going“.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa applauds the MPC for this decision.
“As things stand, their previous cuts have already generated increased appetite in the first-time buyers’ market. This cut will hopefully go a long way to help speed up recovery within the housing market and fuel further growth in the economy.”
“For those who can afford to do so, there really has never been a better time to enter the market than right now. I would just advise buyers to leave room in their budget for if and when the interest rates return to pre-lockdown levels.”
Betterbond CEO, Carl Coetzee says it may now be more financially prudent to buy rather than rent a home.
He is confident that this latest cut will accelerate the recovery of the property market, which was already showing signs of sluggish growth before the pandemic.
“Already bond applications for July, according to the latest figures (released today), are up 52% year-on-year, and we expect to see more activity, especially from first-home buyers, as they take advantage of the lowest interest rate in decades.”
Source: Propertywheel.co.za | https://propertywheel.co.za/2020/07/commentary-further-repo-rate-cut-announced/