With the most recent announcement that interest rates will remain unchanged, property experts have provided their insights on the unanimous decision by the South African Reserve Bank's Monetary Policy Committee.
Interest rate disappointment, rate has been too high for too long
The decision of the MPC of the Reserve Bank to retain the repo rate unchanged at 8.25% (11.75% prime rate) is as expected, but disappointing for the economy and property, says Samuel Seeff, chairman of the Seeff Property Group.
The interest rate has been too high for too long and is negatively impacting the economy and property market. The stance of the Reserve Bank has been too hawkish. While inflation has moderated, the reality is that keeping the interest rate so high for so long has done little to bring down inflation, largely as it is not demand-driven, but rather “imported” into the economy.
Interest rates remain at record highs
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that this announcement will be a bitter pill to swallow for most South Africans. “Although it has been predicted by many economists that the interest rate cutting cycle will be pushed out to begin sometime in 2025, most consumers undoubtedly would have been hoping for a cut all the same,” he notes.
Market confidence still on the up as SA property conditions stabilise
This decision has been met with surprising equanimity by property experts who, until recently, were predicting the start of a long-awaited interest rate cut cycle.
“Inflation is proving remarkably sticky on a global level right now,” says David Jacobs, Regional Sales Manager for the Rawson Property Group. “Unfortunately, that does mean we’re unlikely to see interest rates going down for at least a few months more. That’s not the news homeowners struggling with affordability issues were hoping for, but it’s not the worst thing for the market in general.”
In fact, Jacobs says the last year of unchanged interest rates has played an important role in rebuilding market confidence.
Repo rate holds steady
Dr Andrew Golding, chief executive of the Pam Golding Property group says, much will now depend on future data releases and whether they provide sufficient evidence of continued progress toward the inflation target to embark on a downward repo rate cycle. However, it has become apparent that neither the Fed nor the SARB are in any hurry to cut interest rates until such compelling evidence is available.
While expectations of rate cuts have been repeatedly downgraded and delayed, it is still anticipated that there will be some minor relief before the 2024 year-end. However, the likely timing will depend on the monitoring of future data releases for confirmation that inflation expectations are anchored around the target.
Unchanged repo rate is positive for the property market
For Tyson Properties CEO, Chris Tyson ,the announcement is not unexpected and will see the property market continue to perform as it has during the first half of the year.
Tyson says the Reserve Bank’s decision to maintain interest rates at present levels comes a day after one of the country’s most contested general elections.
He agrees with economists who have said that uncertainty regarding domestic inflation outcomes and the continued volatility of the rand during the lead up to the election means that any drop in the interest rate will, at best, take place at year end.
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