Cape Town – The decision by the SA Reserve Bank’s Monetary Policy Committee on Thursday to keep the repo rate unchanged at 6.75% received a mixed reaction from the real estate sector.
The decision means the home loan base rate will remain at 10.25%.
Samuel Seeff, chair of the Seeff Property Group, said he hoped to see a decrease of 25 basis points.
“At a time of poor business confidence and weak economic growth marred by political instability, a further rate cut would have been an important boost for consumers and the market,” said Seeff following the announcement by SARB governor Lesetja Kganyago.
“There was certainly every reason to expect a rate cut given the better than expected economic growth of 2.5% in the last quarter and the relative stability of the inflation rate in the targeted 3% to 6% range,” he said.
While the overall property market was still in a much better place than it was following the 2007/208 global housing crisis, Seeff said persistent weak economic fundamentals were having an impact.
“Much of the liquidity is now out of the market and it is becoming harder for agents to transact. Properties are taking longer to sell and buyers are hesitant” he said.
Andrew Golding, chief executive of the Pam Golding Property Group, agreed that SA’s housing market would have benefited from a repo rate cut.
In his view, a reduction would have given a boost to economic activity and growth in the residential property market.
“Action is needed to help kick-start the economy and boost confidence in general. (A reduction) would have prompted many home buyers who are currently sitting on the fence to commit to purchase decisions,” he said.
Othe real estate agencies were more sanguine about the rate remaining stable.
Mike Greeff, CEO of Greeff Christies International Real Estate said the MPC’s decision to leave the current interest rate unchanged was a relief.
“We’re seeing a stock shortage, as well as a slight levelling off of house selling price growth, but demand is still high in the Western Cape and unlikely to drop, which means property values will continue to grow,” said Greeff.
“A drop in the repo rate would have been very welcome, but maintaining the status quo is also positive, as it sends a strong message of stability to the market, and this is very important in the current economic climate.”
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, said that, considering the rates had only been cut three months ago, keeping them steady was a decision most would have expected.
With waning consumer confidence, he expected property transactions to remain constrained.
“Until there is improved economic growth and higher numbers of consumers with the required affordability ratios necessary to purchase property, the property market will remain restrained,” said Goslett.
Bruce Swain, CEO of Leapfrog Property Group, said he was heartened by the MPC’s decision, saying it would give home owners a little more breathing room.
“Our consistent message these owners continues to be ‘save, save save’. South Africa isn’t out of the red yet and home owners would be well advised to pay extra funds into their bonds, as and when possible to insure them against any unexpected increases going forward,” he said.
Jacques Fouché, CEO and founder of IGrow Wealth Investments, said even though the interest rate remained unchanged, it was still an excellent time to invest in buy-to-let property.
He said the SA property market remained resilient, offering a great return on investment.
Keeping the repo rate unchanged was good news for the remedial construction industry in that the rate has not started an upward trend, according to Geoffrey Jäck, managing director of painting, waterproofing and construction company Indawo.
He said it is not only the lack of rain that has slowed remedial construction but also the high indebtedness of consumers, who have not been able to keep up with special levies for maintenance.
Corporates too have been reluctant to proceed with building maintenance as the slowdown of the economy has had an impact on spending. The result is building maintenance projects being put on hold. This may have a negative impact on the structural integrity of buildings as the longer repairs are ignored, the greater the damage may be later.