The property industry said on Thursday that the South African Reserve Bank (SARB) has lost an opportunity to show some foresight and courage as the elevated interest rates continue to delay buyers from committing to long-term property purchasing.
The SARB’s Monetary Policy Committee (MPC) on Thursday held the repo rate steady at 8.25%, with the prime lending rate remaining at 11.75% per annum, for the seventh consecutive meeting.
Jawitz Properties CEO Herschel Jawitz said indications were that US rates were set to drop this year, the rand was marginally stronger and South Africa had had two consecutive fuel price decreases, all of which were positive for the consumer inflation rate.
“On the flip side, the SARB has shown consistency in their policy decisions and the current inflation rate still sits above the midpoint of the inflation target,” Jawitz said.
“The interest rate outlook still looks positive for a rate cut later this year.”
Pam Golding Property Group CEO Dr Andrew Golding said a reduction in the interest rate would have given the economy a much-needed kick-start, particularly as inflation was increasingly under control.
“There is a case for local interest rate relief, firstly because there seems to be the likelihood of a US rate decrease following evidence of a slowing economy, a softening labour market and easing price pressures in recent weeks, but also because we have had two recent fuel price cuts – with the fuel price looking set to remain unchanged in August,” Golding said.
“Coupled with this the strengthening in the rand following the formation of the Government of National Unity is helping to temper imported price pressures, and local food price pressures have also abated.”
From a residential property perspective, Golding said economic conditions remained tough, which kept housing market activity subdued and household finances under pressure.
“This is evidenced in the fact that according to Lightstone statistics, the average number of days a home remains on the market in SA’s five major metro markets has risen from 69 days in 2015 to 92 days for 2024 to date, while according to a recent FNB survey, one of the main reasons for selling in Q2 2024 was downscaling due to financial pressure, accounting for an estimated 21.5% of all sales recorded in their loan book,” he said.
Samuel Seeff, chairperson of the Seeff Property Group, said the decision was out of step with the economic needs of the country, and perhaps “a little tone-deaf” in terms of the plight of consumers and homeowners, especially since it was a split decision by the MPC members.
“In some instances middle-class home-owners have been paying up to R1500 to R3000 per month more on their home loans on top of other above-average credit and living cost hikes. The burden on consumers and the economy is too high,” Seeff said.
The interest rate has remained unchanged for well over a year, and was higher than it was following the 2007/8 global financial crisis, he said.
Seeff said rates had resulted in significant value erosion in the property market, which was down by about 25%, while price growth had stalled to below 1%. He said high interest rates and living costs were especially affecting first-time buyers who were unable to afford homes.
“Additionally, those with home loans are increasingly falling into arrears as the banks are reporting increasing numbers of distressed homeowners. This is concerning for the market and economy,” he said.
Nonetheless, Seeff said the market remained positive that an interest rate cut must now come soon.
Cape Times