Picture: Kindel Media/Pexels
Picture: Kindel Media/Pexels

Repo rate unchanged... a cut would have been better -property experts

By Bonny Fourie Time of article published Jul 22, 2021

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“Prudent” and “accommodative” are among the terms property players have used in response to Thursday afternoon’s Monetary Policy Committee (MPC) announcement that interest rates will remain unchanged.

For the sixth consecutive time, the repo rate will stay 3.5% and the prime lending rate 7%.

The decision, says Tony Clarke, managing director of the Rawson Property Group, comes on the back of stronger-than-expected economic growth in the first quarter of 2021, but disappointing recovery in industrial sectors due to ongoing electricity supply issues and recent riot activity.

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“As long as the economy remains under this level of pressure, it makes sense for the SARB to support investment through accommodative interest rates. It’s possible that inflation could trigger an interest rate increase in the near future, but realistically, I don’t see this happening before the middle of next year.”

If the rates had been increased on Thursday, Adrian Goslett, chief executive of Re/Max of Southern Africa says there may have been some “concerning consequences” for homeowners who are “already being pinched by the political unrest and harsher lockdown restrictions during the third wave”.

The MPC’s decision was, therefore “prudent” as many people have entered the property market owing to record-low interest rates.

“Those who entered the market within the last year will have become accustomed to having their bond repayments subject to the current interest rate. Many might not have room in their budgets under the current circumstances to afford an increase at this time.”

That said, Goslett notes that a cut of 25 basis points could have helped ease the economic burden many will face in the months ahead.

While Samuel Seeff, chairman of the Seeff Property Group says the decision to keep rates unchanged is “good news” and “provides vital stability when most needed”, he agrees that a rate cut would have been “more appropriate”.

“There is ample reason for the SARB to have stepped in to provide further relief and stimulus, especially given recent events in KZN and Gauteng which will further delay economic recovery.

“We simply cannot continue seeing this passivity while the economy remains undermined.”

Seeff says the damage caused by the looting further exacerbates the challenges which prevail until the economy is fully opened and functional across all spheres.

Dr Andrew Golding, chief executive of the Pam Golding Property group, also believes a reduction in the repo rate would have “provided some relief to individuals and businesses impacted not only by the effects of the lockdown and recent events but also the increases in fuel and electricity costs and other utility tariffs”. However, the MPC’s approach was “anticipated” and “accommodative”.

He also feels that the next rate hike is likely to only be next year.

“Against a backdrop of a weaker rand and upside risks to inflation, it is widely anticipated that the next move in interest rates will be a hike. While some analysts believe interest rates will begin to rise later this year, the consensus view is that the current economic headwinds will delay the first hike until early-2022.”

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