The Reserve Bank Monetary Policy Committee’s (MPC) decision to keep the repo rate unchanged at 6,5% (mortgage rate at 10%) is disappointing, says Samuel Seeff, chairman of the Seeff Property Group who again called for bold action to stimulate the economy and property market.
We have only had one 25bps rate cut this year (in July) and it is simply not enough, he says. There is ample support for a further rate cut. The second quarter GDP growth of 3.1% was better than expected and inflation, despite slightly up to 4,3% in August, remains fairly benign and well within the bank’s target range of 3%-6%.
The broader macro-environment has also seen the US Fed cut the interest rate. This follows the bold move by the European Central Bank to reduce its rate to minus 0.5% as part of a package of monetary policy stimulation. Simply put, a bold rate cut fuels economic activity as it makes it cheaper for businesses and consumers to borrow, says Seeff.
The SA economy is struggling, and sentiment and lack of political confidence in the market remains worryingly low. Seeff says that a cut in the interest rate would assist, especially since business confidence is at its lowest point in 20 years.
He says further that while FNB has hinted at some stability returning to the property market as it adapts to the post-election reality and there are pockets of excellence with some areas faring above the market averages, the overall story remains that of a flat real estate market when compared to the prior three years. Renting also appears to be the preferred option for those holding out on purchasing.
The national house price, while up marginally to 3.5% by mid-year remains below the CPI and is expected to remain in this range, possibly only ticking up mildly to around 4% next year.
For buyers, it remains a good time to get into the market. Bank lending rates continue trending upwards, says Seeff. FNB for example recently reported that for the first time since mid-2011 the mortgage lending growth rate outpaced house price growth.
After a fairly slow winter, agents are more positive with the onset of the summer months which is traditionally busier for most areas. We hope that buyers will now start taking advantage of the favourable market conditions.
If you are selling and your property is not attracting offers, you may want to chat to your agent to revise your price to ensure that your property is competitively priced in this market, concludes Seeff.