The Monetary Policy Committee yesterday announced that interest rates would be cut by 25 basis points. This lowers the repo rate from 6.75 to 6.5% and the prime lending rate to consumers to 10%. The move has been widely applauded by property insiders, as it is expected to give a much-needed boost to the economy as a whole, as well as the property market.
“This will provide much needed stimulation for the market and, after a very flat 2017, will hopefully be an energy boost to encourage buyers and investors,” says Samuel Seeff, chairman of the Seeff group.
“We expect the move to stimulate the residential market as prospective homebuyers will now find it easier to afford the repayments on a new home loan,” adds Rhys Dyer, CEO of ooba.
Adrian Goslett, Regional Director and CEO of RE/MAX Southern Africa agrees, saying,“I think now was the perfect opportunity to stimulate the economy with a rate cut. Leading up to today, there have been many encouraging signs and consequent offshoots that have impacted the economy positively.”
Timing could not be better, given the 1% tax hike, effective 1 April. “The rates cut provides consumers with some much-needed financial relief. Shrewd citizens will use this opportunity to save for future investments, or reroute the money they’re saving straight back into their bond repayments,” says Goslett.
“Despite the looming increase in VAT and the petrol price levy, consumer confidence will receive a much needed boost from the rate cut. The impact of the rate cut will be a decrease of about R170 per month on a million rand bond over 20 years,” adds Herschel Jawitz, CEO of Jawitz Properties.
Mike Greeff, CEO of Greeff Christies International Real Estate, is also optimistic on the effect on the market: “Any type of easing in interest rates will encourage individuals to get involved in the property sector, as well as bring relief for current bond holders in that it will have two possible effects: it could either create additional disposable income in their budgets, or it will allow for a higher than required bond repayment which can in essence take years off your bond.”
Seeff said further that these developments are good news for the property market. While the outlook for 2018 is much better than last year, it remains largely a buyers’ market for the time being and sellers need to maintain a more conservative approach to their price expectations.