The property industry has welcomed the latest rate cut by the SA Reserve Bank’s monetary policy committee (MPC), calling it a significant shift that will likely improve market sentiment and potentially spark an uptick in buying activity.
SARB cut interest rates by 25 basis points on Thursday with the country’s prime rate now 11.00%, from 11.75% as recently as early September last year.
For a new R2 million home loan at the prime rate, monthly repayments have now decreased by approximately R1,000.
Landsdowne Property Group pointed to a likely significant positive shift in market sentiment for the property market and especially the Johannesburg market which needs rejuvenation.
Jonathan Kohler, Founder and CEO of Landsdowne said: “The cumulative 75 basis point reduction, which amounts to three quarters of a percent is a meaningful shift. Not only does this improve market sentiment, but it also enhances affordability, potentially sparking an uptick in buying activity.
“Each interest rate cut improves perceptions of the market and increases people’s willingness to purchase property. These reductions are exactly what Johannesburg needs to see a return of market activity.
Dr Andrew Golding, chief executive of the Pam Golding Property Group said the cut is encouraging for aspirant home buyers and those with existing mortgages, particularly as the outlook for interest rate relief has shifted significantly during recent weeks.
This is the third consecutive interest rate decrease, following reductions of 25bps at both the September and November 2024 MPC meetings, bringing the total interest rate relief in this current downward cycle to 75bps.
Golding said that although this month’s (January 2025) rate cut was widely anticipated, the outlook for interest rates for the remainder of the year is far less clear with opinions ranging from no further interest rate relief to one single cut of 25bps. “However, the timing of any further rate cut is also debated with some commentators suggesting March 2025 and others later in the year.”
This would make the current interest rate-cutting cycle unusually shallow, he said. This is largely a reflection of the heightened uncertainty in the current global economy amidst concerns of a resurgence in inflationary pressures which is making many central banks – and the SA Reserve Bank in particular -cautious.
“The stream of executive orders from the US White House is also creating uncertainty, prompting a reassessment of the likely scope for further interest rate cuts in the United States, which has shifted from initial expectations of three 25bps rate cuts to a single cut later this year.
“Fewer US interest rate cuts leave less space for local interest rate relief, and any further rate cuts will be dependent on developments both globally and locally,” said Golding.
Notwithstanding this potential uncertainty sentiment has improved, in general, with the previous two repo rate reductions of a cumulative 50bps in 2024 already creating a ripple effect across the residential property market – increasing uptake, particularly in the lower to middle sectors of the market, while also boosting confidence and activity in the luxury market, according to the agency.
Samuel Seeff, chairman of the Seeff Property Group said the latests cut was simply not enough.
A 50bps cut would have been far more meaningful, he said, adding that there was adequate support for the Reserve Bank to counter the economic stagnation and unemployment risks with a more robust cut.
“The country can no longer afford what is effectively the highest real interest rate in the world – differential between the interest rate and inflation – while the economy is limping along, barely growing, and unemployment is spiking.”
As a result of the 25bps rate cut, mortgage repayments will reduce by:
– R750 000 bond – from R7 869 to R7,741– thus saving R128
– R900 000 bond – from R9 443 to R9,290 – thus saving R153
– R1 000 000 bond – from R10 493 to R10,322 – thus saving R171
– R1 500 000 bond – from R15 739 to R15,483 – thus saving R256
– R2 000 000 bond – from R20 985 to R20,644 – thus saving R341
– R2 500 000 bond – from R26 231 to R25,805 – thus saving R426
– R3 000 000 bond – from R31,478 to R30,966 – thus saving R512
– R5 000 000 bond – from R52,463 to R51,609 – thus saving R854
(Based on a 20-year repayment period at the prime rate)