Repo rate cut to stimulate housing market

The  Reserve Bank’s Monetary Policy Committee (MPC) announced some positive news for our country today by lowering the interest rate by 25 basis points. The repo rate drops to 6.25% and the prime lending rate changes to 9.75%. 

With limited, modest growth anticipated for the year ahead (2020), it is encouraging that the Monetary Policy Committee saw fit to reduce the repo rate by 25bps in order to help kickstart the economy and foster increased confidence among consumers who are feeling the pressure of ever-rising costs,” says Dr Andrew Golding, chief executive of the Pam Golding Property group. 

With subdued growth and muted inflationary pressures, the Reserve Bank’s decision is welcome – particularly given the heightened uncertainty ahead of the 2020 Budget speech and likely downgrade of SA’s credit rating to junk status by Moody’s in March.

“Despite the ongoing economic challenges faced, including the reintroduction of load shedding, we continue to see signs of green shoots in the residential property market place. Having experienced a period of correction in regard to house prices, first-time and a mix of other home buyers are seeing the market in a positive light, further buoyed by financial institutions’ robust appetite for lending. This is enabling more aspirant buyers to gain a foothold on the property ladder,” adds Golding.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett adds: “This cut will provide further relief to homeowners who are battling to keep up with their monthly repayments, thereby lessening the number of homes that will enter the market and evening out the scales of supply and demand. Lower interest rates are likely to incentivise consumers to take on debt, which should, in turn, increase the number of buyers looking to purchase property over this time. I therefore remain hopeful that this announcement will translate into some corrective growth for the housing market,” Goslett explains.  

From a residential market point of view, Jawitz says that the benefit of the rate cut will really be the impetus needed for first-time buyers and the lower and middle markets. “With marginal price growth and, in some areas falling prices, together with a very favourable lending environment, the current market offers the best buying opportunities across the market since 2009. The real key as to why more buyers are not taking advantage of this market is not financial but rather confidence; and the rate cut may benefit both,” says Herschel Jawitz, , CEO of Jawitz Properties.

While the decision by the MPC to cut the repo rate by 25 basis points is welcomed, “We need more”, says Samuel Seeff, chairman of the Seeff Property Group.

“The Reserve Bank’s stance has been too conservative over the last year at the expense of the economy and property market. Consequently, it missed at least two, possibly three opportunities to cut the rate given that inflation has remained well within the target range for most of last year while the currency remained reasonably stable, and in fact improved,” adds Seeff.

SOURCES Pam Golding Property group, RE/MAX SA, Seeff Property Group, Jawitz