JOHANNESBURG - The South African property market has welcomed the interest rate cut announced by the South African Reserve Bank on Wednesday.
Lesetja Kganyago, the governor of the central bank, said since the previous meeting of the Monetary Policy Committee (MPC), the risks to the inflation outlook have subsided somewhat.
“The rand has reacted positively to domestic political developments in the past months and was given further support following the recent sovereign credit rating announcement,” Kganyago said.
Greeff Christies International Real Estate was one of the companies that welcomed the decision. “Given the cut in the repo rate by the South African Reserve Bank, the property market can expect a very healthy surge,” the company’s CEO Mike Greeff said.
“Any type of easing in interest rates will encourage individuals to get involved in the property sector, as well as bring relief for current bond holders in that it will have two possible effects: it could either create additional disposable income in their budgets, or it will allow for a higher than required bond repayment which can in essence take years off your bond.”
Greeff says a lower interest rate is also a positive for the banking sector, as it will create an influx of customers applying for home loans. “These clients are willing to enter into long-term commitments with banks and lending organisations, which would guarantee income stability for the next two decades at least.”
Ooba, South Africa’s biggest bond originator, welcomes the interest rate cut of 0.25% announced by the South African Reserve Bank this afternoon.
On a R1m home loan, this Reserve Bank decision will save South African home owners approximately R39 900 on a R1 million home loan over a 20 year term. The home buyer’s saving will be R166 on their monthly bond repayments.
“ooba expects the lower interest rate to stimulate the residential housing market as prospective homebuyers will now find it easier to afford the repayments on a new home loan”, said Rhys Dyer, CEO of ooba.
The current South African property market outlook remains cautiously favourable with moderate house price growth, relatively low interest rates and an increased appetite from the major lenders to lend.
Dr Andrew Golding, on behalf of Pam Golding Properties said that the rate cut was a further boost for market sentiment.
Golding said, “These announcements are favourable for consumers and market sentiment. Firstly, with Moody’s decision another cloud of uncertainty has been lifted from the local economic landscape. The news reinforced recent rand strength and, since it follows a better than expected inflation release for February – with the inflation rate easing to just 4%, marginally below market expectations – this strengthened the case for an interest rate cut. The repo rate reduction to 6.5% is the first cut since July 2017. Based on the views of economists and various market commentators, interest rates are now likely to remain unchanged at this level for the remainder of the year."
- BUSINESS REPORT ONLINE