South African interest rates has been too high for too long, according to Samuel Seeff, chairman, Seeff Property Group. File Picture: Leon Nicholas
Now is the time for an interest rate cut to help financially stretched South Africans to get some much needed relief in the form of a 25 basis points cut in the repo rate.
This is the view of Seeff Property Group chairman, Samuel Seeff, who said that the interest rates had been too high for too long and cannot be delayed any longer. He said the high interest rates had already caused more damage than good in the sector.
This week, the South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) has expected to make its announcement on the repo rate for the next quarter.
The interest rate announcement is expected to take place on September 19, 2024.
“There are more than adequate reasons for the Sarb to provide an interest rate relief to benefit consumers, the economy and property market. The higher than necessary rate is hampering growth in the economy and property market,” Seeff said.
“The economic outlook has improved visibly, and we are seeing the benefits of the Government of National Unity (GNU) in aspects such as billions of rand flowing into South African bonds, while the JSE has hit record highs over the last month.”
The uninterrupted energy supply has further benefited the economy plus economic indicators have also showed improvement with factors such as the falling oil price leading to petrol price cuts which further benefits consumers and the economy.
The rand has strengthened since the last MPC meeting and is now trading at R17.76 to the the US dollar. Inflation too has hit a three-year low sitting at 4.6% in July and is expected to lower even further to within the Sarb’s target range.
According to Seef, leading central banks have cut their rates in recent months including the Bank of England, and the European Central Bank while the US Fed is also expected to cut the rate this week.
Seeff said that while the SA economy needs a 50bps cut, at the very least a 25bps rate relief is expected this week.
“It is almost unthinkable that the Sarb would remain tone deaf to the plight of the economy and consumers,” Seeff said.
First-time home-buyers are struggling to get into the market while middle class homeowners have absorbed additional monthly bond repayments of up to R1,500 to R3,000 more per month along with the higher cost of living and other credit commitments.
According to Lightstone, due to the high interest rate, transaction volumes have dropped by nearly 40% since 2020/2021, and are effectively now down to levels last seen in 2010.
A cut in interest rates would boost buyer demand, and buyers should be able to benefit from the current flat prices.
IOL Property