The decision to retain the repo rate is very disappointing for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group.
At a time of poor business confidence and weak economic growth marred by political instability, a further rate cut would have been an important boost for consumers and the market, he said.
This follows the decision by the Monetary Policy Committee (MPC) of the South African Reserve Bank to retain the repo rate at 6.75% (home loan base rate at 10.25%).
There was certainly every reason to expect a rate cut given the better than expected economic growth of 2.5% in the last quarter and the relative stability of the inflation rate in the targeted 3%-6% range. While the rand continues its volatility, we have not seen any drastic fluctuation recently and Seeff therefore believes that a rate cut would have been the correct decision.
Seeff further pointed out that it is vital to restore economic and political confidence if we are going to get the economy back onto a growth trajectory necessary to create the jobs needed to addresses poverty.
Consumers are struggling, of that there is no doubt, said Seeff. John Loos from FNB’s latest Property Barometer points to a further rise in the debt-to-disposable income ratio and hence a higher risk of inability to service the debt.
While the overall property market is still in a much better place than what it was following the 2007/8 Global Housing Crisis, Seeff said further that the persistent weak economic fundamentals is bearing down on the property market. Much of the liquidity is now out of the market and it is becoming harder for agents to transact. Properties are taking longer to sell and buyers are hesitant. Serious sellers need to revisit their price expectations.
But, following a slow winter, the onset of spring seems to have brought some buyers out of hibernation as the property group reported an uptick in buyer enquiries since early September. Agents are also sensing that many buyers are sitting on the fence, waiting and watching what unfolds in the country in the coming months. A rate cut certainly would have been some incentive in this regard.
In the meantime though, business continues and property transactions are concluded daily. If you are serious about selling, talk to your agent about setting your price at the right level. For buyers too, he said that if you find the right property at the right price, then be sure to put pen to paper.
