Interest rate stability welcomed, but rate cuts urged

Samuel Seeff, chairman of the Seeff Property Group, commented that the Reserve Bank’s MPC’s decision to retain the repo rate unchanged at 8.25% (11.75% prime rate) is important for stability as we approach the elections.

While we always hope for a rate cut, the decision was largely expected in view of the persistently high inflation rate. Inflation increased again in February (to 5.6% from 5.3% in January), which puts it near the upper limit of the Reserve Bank’s target range. The MPC was, therefore, unlikely to provide any interest rate relief at this time.

Nonetheless, the market remains upbeat that rate cuts are imminent and should come by mid-year. The economy is in somewhat of an impasse and needs a boost, and with that, the property market too. Seeff says further that the higher than necessary interest rate is impacting on the market, both in terms of sales volumes and prices.

There has been a notable decline in sales volumes since the middle of last year, and price growth has stalled to just about under 1%, which is not a great incentive for sellers. However, it is still good for buyers, who, despite the higher borrowing costs, can find good deals in the market.

The flat price growth means that property prices in many areas are very similar to what they were two years ago, which is quite unheard of and a huge benefit for buyers. At the same time, many motivated sellers are willing to consider serious offers.

Although more people are selling for financial reasons and consumers are under enormous pressure, the banks are still signalling that there has been no notable increase in distress in the market. Seeff says there is unfortunately little room for bargain hunters in the property market. If you are a serious buyer, however, you will likely find a reasonable price right now and can benefit once the interest rate comes down.

Bank data further shows that mortgage lending continues to favour the market with stronger approval rates and lower deposit requirements compared to the pre-pandemic period. First-time buyers can also still find full 100% bonds, and in some instances, with an allowance for costs on top of that.

The current market’s upside is that it is ticking over as buyers look to take advantage of the lower prices. Sellers, however, should be aware that the slowed growth and weaker demand mean buyers are looking to negotiate. Realistic pricing will likely attract buyers while overpricing or testing the market will yield no results. If the price is right and the buyer sees the value, they will pay the price.

Writer: Gina Meintjes