The decision by the Monetary Policy Committee to keep the repo rate unchanged at 8,25% (prime and base home loan rate 11,75%), is a welcome reprieve for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group.
“It was the correct decision, given that inflation has, against expectation, been coming down rapidly over the last three months to 5,4% in June and is now within the Bank’s 3%-6% target range. The rand-dollar rate has also strengthened.
Consumers, homeowners and buyers have had to absorb enough rate hikes now, Seeff says further. “The interest rate is already too high and has been stymieing economic growth and driving unemployment and higher debt levels. The higher interest rate has done more harm than good. The bank should now be looking at lowering the interest rate.”
Along with electricity and other hikes, the burden on consumers, homeowners and buyers has been simply too high. The higher interest rate has also driven property sales down by volumes even in the Cape market, which has been strong.
The market is now challenging for sellers and first-time buyers. The upside, though, says Seeff, is that the market now is undoubtedly a buyer’s. The effect is that sellers will now have to focus on pricing accurately to attract buyers.
For buyers this could be one of the best times to buy, with prices trading relatively flat while the banks are still lending, even though they must now budget for the higher interest rate.
Seeff says it feels similar to the period before the 1994 elections and the 2008 global financial crisis. Those who had bought before, in 1993 or 2006/7 with the perceived risk at the time, subsequently benefited greatly from good capital growth that followed.
