The Monetary Policy Committee (MPC) made the unsurprising announcement on 24 May that the repo rate will be kept stable. As it stands, the repo rate is at 6.5% while the base home loan rate is at 10%. While not surprised, industry insiders have commented that it is welcome news for the property market.
Adrian Goslett, CEO of RE/MAX Southern Africa, comments that the Reserve Bank Governor, Lesetia Kganyago’s decision is good news for South Africans: “According to Kganyago, the rand is currently 6% weaker against the dollar than what it was at the last MPC meeting. Pair this with the ever-rising fuel and oil prices, likely changes in global monetary policies and the likelihood for increased inflation rates and it becomes easy to understand why the MPC chose to keep lending rates where they are.”
The MPC’s conservative stance with regard to a rate cut is seen as a positive. According to Stuart Manning, group CEO for Seeff, the country’s sluggish economy and pressure on the CPI due to rising costs, paired with renewed volatility in the currency, means it was to be expected that the MPC would take this route. Dr Andrew Golding, chief executive of the Pam Golding Property Group elaborates: “Positively however, growth prospects for the housing market are definitely improving, so there is some upside on the horizon, but what we need now from the Reserve Bank is a steady hand in regard to the repo rate.”
An optimistic outlook
Manning says that he remains optimistic about the country’s property market, bearing in mind that consumers have had to absorb the VAT hike, along with petrol price and other cost increases. He adds that, despite these challenges, there are many positives: Banks are granting more bonds, and price growth is still fairly flat, which means now is a great time to buy.
Goslett adds that smart citizens will make the most of the current low interest rates while they last, by investing in property now. “At present, with improved political and economic sentiment, and with the recent interest rate cut and improved outlook for economic growth, we are also seeing more affordable areas in South Africa’s economic heartland of Gauteng, as well as other accessibly priced properties in the various regions becoming more and more appealing,” explains Sandra Gordon, Pam Golding Properties senior research analyst.
Manning says that they have also noticed an uptick in the Gauteng markets. He notes that, for the first time in many years, there has been a surge in transactions above R20m in top-end Johannesburg areas. This, he adds, is a good indication that confidence is returning to the market, as these markets are also usually the first to feel a recovery.
Over in the lower to middle market segments, Golding points out that they have seen a strong demand for properties up to the R5m mark, with credit lending a positive contributor to market activity. Manning also remarks that properties ranging from R1.5m to R2.5m have seen strong activity.
Given homebuyers’ shifting needs and circumstances, Gordon also notes that there has been an increased demand for sectional title properties. “Our country is fortunate in that we have a young, growing population which has yet to enter the housing market. With affordability considerations making sectional title properties the preferred entry point for first-time buyers, demand for sectional title properties is likely to remain brisk for the foreseeable future,” she explains.
While it’s impossible to predict the future regarding future rate hikes or cuts, there’s one thing we can all agree on. If you’re looking to buy, now would be a good time. As always, it’s crucial to do your research and surround yourself with trustworthy experts in the field.