24 November 2023: Thursday’s announcement by the Monetary Policy Committee (MPC) maintaining the current interest rate at 8.25% has prompted a collective sigh of relief among property owners nationwide. Here are the reactions from a few property experts.
Finance manager for Rawson Property Finance Leonard Kondowe
Pegging interest rates at their current levels is a step in the right direction for the property market. The distressed property market is busier than ever, but the lack of affordability means the pool of qualified buyers is small. Anything eroding affordability, be it fuel price hikes, living costs, or interest rates, will chip away at that pool even more.
Silver linings, however, include lenders’ increasing hunger for qualified bond applicants, leading to a competitive lending market. Lenders seem to be taking a ‘bigger picture’ approach to property finance, using it to secure long-term customers across a wider range of banking products. Understanding this trend is useful for negotiating mortgage offers.
High Street Auctions director Greg Dart
Data from the latest Business Confidence Survey shows a further slip in South Africa’s business confidence in the fourth quarter, with consumer income under pressure from high borrowing costs.
Those costs are based on the repo rate, which while unchanged by the MPC, is still at a 14-year high. Household finances are troublingly weak, and are unlikely to improve on the back of surging annual consumer price inflation that reached 5.9% in October, up from 5.4% in September.
While the unchanged prime lending rate is extremely good news, the country is far from out of the woods. The government and the Reserve Bank need to work harder for real and lasting economic change. Food price inflation is too high, the cost of electricity is huge, and grid instability poses a grave threat to the country.
CEO of the Pam Golding Property group Andrew Golding
In the housing market, this is good news for interest-rate-sensitive first-time buyers, whose applications (according to ooba) continued to decline. It is also positive for existing homeowners with mortgages, or those seeking credit to downsize, upsize or relocate.
With price pressures easing and the prospect of interest rate cuts, this should go some way towards galvanising the local housing market in early 2024.
Generally speaking, the outlook for 2024 is likely to show improvement compared to 2023. This announcement could be the start of a downward trend in interest rates, typically signalling an uptick in activity and the start of a cycle of real house price growth.
Lew Geffen Sotheby’s International Realty CEO Yael Geffen
Inflation is creeping perilously close to the top end of the Reserve Bank’s target band. While this prime lending rate status quo is excellent news for consumers – especially ahead of the festive season – it shouldn’t be seen as a green light for spending sprees.
Total outstanding household debt in South Africa in the second quarter was a staggering R2.78 trillion, with mortgages accounting for around 46%. To think that we as mothers, fathers, newlyweds and young homeowners owe that much money in our personal capacities, is shocking and we can’t bury our heads in the sand.
However, rate cuts next year could give renewed impetus to the property market and offer opportunities for more buyers to step onto the real estate ladder.
Tyson Properties CEO Nick Pearson
First time homeowners have been hardest hit by a steady rise in interest rates – and are probably the most relieved by the Reserve Bank’s decision not to hike interest rates ahead of the festive season.
This is positive for both buyers and sellers and might just provide extra confidence which we do need. We had a strong start to the year, but the past three months have been a little slower.
If we experience a levelling-off period now, allowing things to settle a bit, it will certainly stimulate the economy. Hopefully, by mid-next year, we’ll see one or two interest rate decreases.
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