The Reserve Bank has announced its decision to cut the repo rate by a further 50 basis points to 3.75%, reducing the home loan rate to 7.25%.
Samuel Seeff, chairman of the Seeff Property Group believes that this provides vital savings to property buyers and bond holders:
“These are unprecedented and uncertain times and we need as much support from the Reserve Bank as possible to boost confidence to invest in the property market and economy as we emerge from the lock down … Especially, as inflation is expected to remain well within the 3%-6% target range“.
“This is the fourth interest rate cut this year. Aside from the financial relief for households, it has created an unprecedented opportunity for buyers to take advantage of the near five-decade low borrowing costs and drastically improved affordability“.
Samuel Seeff also noted his disappointment that the Reserve Bank did not take the opportunity for a bolder rate cut of at least 100 basis points to inject vital confidence into the economy.
The property market and economy is in a deteriorating state with GDP expected to decline by as much as 6% to 14%, well below the 2008 Global Financial Crisis when it only contracted by about 1.5%.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett says that this is fantastic news for the real estate industry:
“Dropping interest rates allows struggling homeowners the opportunity to keep up with the installments on their home loan. This means that fewer homes will be forced onto the market which lowers the possibly for a housing market crash where supply far outweighs demand and property values plummet.”
He also hopes that these record-low interest rates will incentivise buyers to invest in real estate despite the current challenges: “Lower interest rates usually incentivise consumers to take on new debt. However, given our current economic outlook as a result of the lock down, it is unlikely that many consumers will have the necessary means to make such a substantial investment at this time.”
Dr Andrew Golding, chief executive of the Pam Golding Property group believes the repo rate cut will have a positive effect on the residential property market, albeit deferred until potential buyers can begin transacting in earnest.
“This is some good news for the residential property market and the real estate industry, which is under considerable pressure at present … buyers remain hesitant to commit on the basis of ‘sight unseen’. Once real estate is allowed to operate at full strength, which we hope will be in the near future, we will be able to ascertain the net effect of the recent extensive reduction in interest rates thus far this year“.
“With inflation still at the lower end of the 3-6% target band, it is also hoped that the current low interest rates – last experienced in the early-70s, will help bolster the economy and provide prospective home buyers and investors with an incentive to make property buying decisions“.
Carl Coetzee, CEO of BetterBond believes that the fourth interest rate cute for 2020 is good news for consumers, but it could be even better news for those who have been renting for a long time and are looking to become homeowners.
With rates at 50-year lows, for some the scales of their monthly budgets could be at a tipping point where it might become cheaper to buy than to rent.
Add to the equation the fact that there’s no longer any transfer duty payable on property prices up to R1 million and the balance could tilt further in favour of buying versus renting.
Source: Propertywheel.co.za | https://propertywheel.co.za/2020/05/further-repo-rate-cut-generally-welcomed-by-anxious-property-industry/