South Africans will continue feeling the pinch as interest rates are not yet expected to come down.
However, a rate hike is not forecast when the Monetary Policy Committee’s (MPC) meets at the end of the month.
High Street Auctions director Greg Dart said South Africans aren’t likely to feel any reprieve.
However, the outlook for local and global inflation was better than it has been for some time and Dart was optimistic that we could see a rate cut in March, or in the second quarter of this year.
“South Africa –like most countries – tends to follow the US Central Bank and economists there are predicting the first rate cut to come at the end of Q1.
“Hopefully, we’ll be close behind.”
Lew Geffen Sotheby’s International Realty chief executive Yael Geffen agreed that the MPC will likely leave the repo rate unchanged at its first meeting of the new year.
“The good news is that there probably won’t be an increase. The bad news is that the prime lending rate is probably only going to ease slightly at the end of the first quarter, or in the second quarter of the year.
“We need interest rates to come down to reinvigorate the residential property sector.”
Following a challenging 2023, Samuel Seeff, chairman of the Seeff Property Group, said the economy and property market are in dire need of a positive injection.
“Thus, a 0.25% rate cut to kick off the 2024 year would be a “vital boost”.
FNB also expected the repo rate to remain unchanged at 8.25%, meaning the prime lending rate will hold firm at 11.75%.
However, the bank’s senior economist Koketso Mano does not expect the cutting cycle to start just yet.
“We think the MPC still requires more evidence that inflation will anchor at the 4.5% target within the policy horizon.
“Unfortunately, heightened geopolitical tensions, biosecurity as well as adverse weather patterns complicate the deceleration trend in inflation and could prolong the lift in inflation expectations away from target.
“In addition, this year’s elections, and any further fiscal slippage not only risk a weaker rand and further inflationary pressure but would worsen the risk premium required to invest in South Africa, which automatically lifts the estimate on the rate of interest that neither supports nor restricts economic activity (neutral).”
Therefore, Mano said, the MPC is likely to wait at least until the event risk of the elections has passed.