The South African property market and national economy have been significantly impacted by the Reserve Bank's decision to maintain the repo rate at 8.25%.
This move has been met with frustration and disappointment among industry leaders. The combination of rising living costs and a stagnant economy is exerting considerable pressure on middle-class homeowners.
Delays in cutting the interest rate are causing more harm than good to the economy and property market, said Samuel Seeff, chairman of the Seeff Property Group.
After a promising start to the year, property transaction volumes have plummeted by 25%, averaging just 17,350 per month compared to 23,100 in 2021 when the interest rate was at 7.25%, Seeff has said.
Additionally, national house price growth has declined to below 1%.
Seeff pointed out that the economy was beginning to show signs of growth when the interest rate was below 10%. At 11.75%, it is simply too high and is damaging both the economy and the property market, he said.
Seeff expressed concern over the latest decision, highlighting the financial strain it imposes on consumers and homeowners.
With the unchanged repo rate, many homeowners face increased monthly loan payments, exacerbating their financial burdens.
First-time homebuyers are finding homeownership increasingly out of reach due to high interest rates and living costs. Existing homeowners are also struggling, with a growing number falling behind on payments, leading to a rise in distressed properties.
Despite these difficulties, Seeff remains optimistic. He anticipates a future cut in the interest rate, which could provide relief for buyers.
Lower rates might enable buyers to capitalise on the current stagnation in property prices and benefit from potential savings and property value appreciation when market competition intensifies post-rate cut.
In the current slower market, buyers face less competition, potentially allowing them to purchase properties at favourable prices. Mortgage lending conditions, while slightly tightened, still remain advantageous for buyers.
Seeff stressed the importance of a robust economy and property market for the country's overall well-being. The optimism surrounding the Government of National Unity (GNU) points to a brighter future.
The recent economic growth achieved under a lower interest rate serves as a hopeful indicator for future prosperity.
While the Reserve Bank's decision to maintain the repo rate presents significant challenges, it also opens up opportunities for savvy homebuyers and underscores the potential for future economic improvement, Seeff said.
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