The decision of the MPC of the Reserve Bank to retain the repo rate unchanged at 8.25% (11.75% prime rate) is as expected, but disappointing for the economy and property, says Samuel Seeff, chairman of the Seeff Property Group.
The interest rate has been too high for too long and is negatively impacting the economy and property market. The stance of the Reserve Bank has been too hawkish.

While inflation has moderated, the reality is that keeping the interest rate so high for so long has done little to bring down inflation, largely as it is not demand-driven, but rather “imported” into the economy.

Seeff says further that instead of bringing down inflation, the high interest rate has stymied the economy. The debt servicing burden on consumers and homeowners and living costs have spiked, while salary hikes have been moderate. Standard Bank also recently signalled concern that the level of home-loan distress is on the rise.

Seeff says there is a high desire for property ownership which is clearly reflected in the market. Although overall transaction volumes are slower, it remains surprisingly active, despite the economic headwinds. People want to transact and invest, but are hampered by the unnecessarily high interest rate.

In light of the prolonged pressure on the economy, Seeff says an urgent kickstart is needed. Rate cuts need to take effect sooner rather than later. Holding back is simply doing more damage to the economy. A growing economy will also boost the value of the rand, so concerns about the currency should not be a motivator to keep the rate at the current high level.

Capitalising on the buyer's advantage

We are still in one of the best buyer’s markets despite the higher interest rate. The flat price growth means you can buy at prices which are very similar to what they were two years ago, especially at the higher price bands.

If you are able to afford property at the current interest rate, you stand to benefit when the rate drops and the market improves, not only from a lower home-loan repayment, but prices will also tick up once the market starts moving with a degree of vigour.

Encouragingly, we are still seeing favourable bank lending conditions, adds Seeff. First-time buyers especially are able qualify for 100% bonds (up to 105% in some instances inclusive of costs).

Additionally, first-time buyers earning between R3,501 and R15,000 per month are able to qualify for a housing subsidy under the Finance Linked Individual Subsidy Programme (known as Flisp). There is also no transfer duty payable on the first R1.1m of the property price which is a considerable saving.

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