Local consumer confidence, which has rebounded to a five-year high in Q3 2024 - the third consecutive quarter of improvement and the highest reading since mid-2019 - has received another significant boost with the Monetary Policy Committee’s announcement of a 25bps cut in the repo rate, heralding the start of a downward interest rate cycle.
This is according to Dr Andrew Golding, chief executive of the Pam Golding Property group, who said that since the latter part of 2023 there has been a marked improvement in consumer confidence, citing the FNB/BER Consumer Confidence Survey.
During the past six months alone, consumer confidence has surged by 10 points, signalling a significant recovery in consumers’ willingness and ability to spend due to a more positive outlook. This is a major positive for the housing market, particularly in spring when residential market activity begins picking up again.
"Hopefully this is the start of the long-awaited interest rate cutting cycle, and with things moving both globally and locally in a more favourable direction, it provides scope for further rate cuts and significant relief for households and therefore a more supportive environment for a recovery in the housing market during the next 12-18 months," said Golding.
"Lower inflation, four consecutive fuel price cuts, plus the prospect of further interest rate relief during the remainder of the year will bolster real disposable income, while the absence of loadshedding for 175 days is further contributing to the improved economic outlook. It is positive for both economic growth and price pressures, as businesses and households no longer feel pressured to find and fund alternative sources of energy."
He noted that commentators are predicting 50bps rate cuts in total before the year-end, while the Federal Reserve Bank is likely to cut by 100bps by the end of 2024.
"So with the rand holding up, and with weaker global oil prices, SA analysts are forecasting a total of approximately 50bps during the remainder of 2024, resulting in just over 100bps in total during the next 12 months."
Golding said that the local residential property market has seen a shift to cash purchases and investment acquisitions during this period of relatively high interest rates, but as interest rates begin to decline and affordability returns to the market, first-time buyers and those requiring loans will come more to the fore.
"With the formation of the GNU (Government of National Unity) having been well received by financial markets, we also anticipate that any regions or districts which can be seen to have benefited from a change in governance since the May elections could potentially see a rebound in prices and activity."
Samuel Seeff, chairman of the Seeff Property Group, said the Reserve Bank brings welcome relief for consumers and property buyers.
"We would have liked to have seen a 50bps cut, but we are happy to take 25bps, and hope this is the first of more rate cuts to follow, he says further. Especially, given that the US Fed cut its rate by 50bps and plans two further rate cuts of 25bps each. This follows recent cuts by the Bank of England, and two cuts by the European Central Bank."
He said that the scene is set for the economy and property market to grow, but both need more interest rate relief. "We are seeing the positive effects of the Government of National Unity (GNU) starting to bear fruit. The energy grid has also now been stable for close to six months which is a huge boost for the economy."
There is a lot of pent-up demand in the market, with estate agents, sellers and buyers all eagerly anticipating that this cut will have a positive impact. On top of the petrol savings and lower inflation, the rate cut will add money back into the pockets of consumers to spend in the economy, and improve affordability of homes, he said.
"Best of all, while no-one ever rings a bell to tell you that the market has bottomed out and it is time to buy property, we certainly believe that we are potentially in one of the best markets for property buyers. Price growth has been particularly weak over the last two years, especially in markets such as Gauteng and KZN and other inland areas."
Buyers are therefore able to find good value, and they should take advantage before the market takes off again.
More buyers in the market is also good news for sellers. Agents certainly anticipate an increase in offers, especially as we move into the warmer months. Once competition and momentum in the market increases, prices should start ticking up, he added.
As a result of the 25bps rate cut, mortgage repayments will reduce as follows:
R750 000 bond – from R8 128 to R7 998 – thus saving R130
R900 000 bond – from R9 753 to R9 598 – thus saving R155
R1 000 000 bond – from R10 837 to R10 664 – thus saving R173
R1 500 000 bond – from R16 256 to R15 996 – thus saving R260
R2 000 000 bond – from R21 674 to R21 329 – thus saving R345
R2 500 000 bond – from R27 093 to R26 661 – thus saving R432
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