Retained repo rate ‘fair’ says property industry

The decision by the South African Reserve Bank (SARB) to
retain the repo rate at 3.5% (home loan base rate is 7%) is “disappointing
and out of step with the economy
” says Samuel Seeff, chairman of the Seeff
Property Group.

A rate cut would have provided a vital business and
consumer boost ahead of the busy retail and holiday season, freeing up cash to
spend in the economy during one of the most challenging times
” he says.

Seeff goes on to note that the third quarter economic bounce-back is unlikely to result in a net growth position and overall, the outlook remains negative as confirmed by Moody’s and Fitch. This combined with the benign inflation rate which, at just 3% is at the bottom of the Reserve Bank’s target range, was a strong enough case for at least a further 25bps rate cut.  

Dr Andrew Golding, chief executive of the Pam Golding Property group says that we are experiencing at present, is a continued strong uptake in demand for residential property acquisitions around the country – particularly in the price band of up to R3 million, with additional encouraging signs of increasing activity at the top end of the market.

While the real estate industry came to a virtual standstill
during the months of the hard lockdown, the pent-up demand has surpassed
expectations, and has now shifted into gear to what is hopefully translating
into a sustainable ongoing momentum in the housing market

On the back of a low interest rate environment, further
fuelled by a keen appetite among young and first-time buyers – which is
especially evident in the lower and middle sectors of the market, and coupled
with generally more realistic pricing, a ripple effect is filtering through the
market, placing upward pressure on demand through the various price bands

The MPC has indicated that the repo rate will most
likely remain unchanged at current levels until mid-2021, inching higher during
the second half of 2021. While it remains to be seen how the country’s economic
recovery gains traction, we believe that solid foundations and fundamentals
remain in place for ongoing investment in the residential property market. This
is especially so since, in addition to the usual reasons for movement in the marketplace,
the lockdown has inadvertently created the rationale for a wave of new reasons
for relocation and property acquisitions, from upsizing for additional space
due to work from home scenarios to lifestyle moves to more appealing
destinations further afield

The Monetary Policy Committee’s decision to hold the repo
rate steady yet again, at 3.5%, should be seen as a reminder from the South
African Reserve Bank to make the most of the favourable lending rate while it
is in single digits
” comments Carl
Coetzee, CEO of Betterbond

the South African Reserve Bank’s forecast is that the repo rate will only start
to climb towards the end of 2021. Not only is it the ideal time to apply for a
bond – as the lower interest rates have made homes 30% more affordable – it is
also a good opportunity for those with the financial means to pay more into
their bond to reduce their overall repayment period

five consecutive rate cuts that have seen the prime lending rate drop from 10%
in January to the current low of 7%, have already resulted in the unexpected
rebound of the property market. Instead of house price freefall and stagnant
sales activity many expected in response to the pandemic, prices have
strengthened – especially at the lower end of the market where demand is strong
– and bond applications have exceeded pre-lockdown levels

attributed the initial uptick in bond applications and sales activity to
pent-up demand, but the protracted recovery of the market suggests that the
historically low interest rates have certainly been the predominant stimulus. With
interest rates likely to remain in the single digits until the end of 2022, we
encourage buyers to make the most of this conducive lending period by investing
in property

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa believes there is the possibility that there will be a slight increase of around 0.5 points for 2021, but this should not have a great impact on the property market. As things stand, the low interest rates (in conjunction with other factors) have created a housing market boom, particularly within the first-time buyers’ market.

Goslett remarks that the property market has made an unexpectedly fast recovery after months of inactivity during Alert Levels 5 and 4 of the national lockdown. “Our reported sales figures year-to-date for October is up by 3% from last year. This is following three months during hard lockdown (from April to June) where our sales figures dropped by as much as 62% YoY. A possible reason for the fast recovery we have seen is that many have had to adjust their living situations and lifestyles to suit the post-lockdown world. The low interest rates have also made it incredibly appealing for first time buyers to enter the market.”

While it is
unlikely that interest rates will return to their previous levels of around 10%
within the near future, I would still caution buyers to leave room in their
budget for future interest rate hikes over the period of their lending term. I
would also encourage them to make the most of the current market conditions
before it changes into a seller’s market – which could happen within the months
to come if activity continues to remain as high as it has been in the last
three months

The announcement by the Reserve Bank’s Monetary Policy Committee that the repo rate will remain unchanged at 3.5% is fair news for the economy in general and good news for the property market in particular” notes Bruce Swain, CEO of the Leapfrog Property Group.

In the
buyer’s market that we are currently experiencing an unchanged interest rate
makes property more affordable and thus more accessible to more buyers,
particularly those looking to enter the market for the first time. An active
property market is central to igniting our stagnant economy, so an unchanged
rate is certainly preferable to an increase

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