Reserve Bank keeps repo rate unchanged
The South African Reserve Bank’s monetary policy committee on Thursday voted to keep the repo rate unchanged at 6.5%, with a base home loan rate of 10%.
However, the central bank’s governor Lesetja Kganyago revised the country’s expected GDP growth for 2018 to 1.2% from a previous estimate of 1.7%.
The Seeff Property Group welcomed the decision to retain the repo rate at the current level.
It noted that the decision was largely anticipated by the market given the better than expected consumer inflation figure of 4.6% for June (lower than the market expectation of 4.8%), despite the weaker exchange rate.
Although the currency fluctuation poses a risk of monetary policy tightening, analysts believe that while inflation remains within the 3%-6% target range, the Reserve Bank is likely to keep the interest rate flat for the rest of the year, it said.
“This decision is good news for consumers and property owners, especially those with mortgage bonds,” said Stuart Manning, CEO of the group. “Bear in mind that consumers have had to absorb a number of cost hikes, most notably the petrol price increases, so any interest rate saving, is a boon.”
Aside from the economic pressure, the political noise and policy uncertainty around land expropriation remains a concern for the market. It has made many buyers, especially at the top end of the market and those who do not have to buy right now, hesitant, both local and foreign buyers alike.
The risk of further cost hikes on the back of a weaker currency and petrol price hikes means that the economy is likely to remain sluggish throughout the year, Seeff said.
Manning said this will leave us with an overall weaker property market although there are pockets of good growth in both turnover and prices.
Dr Andrew Golding, chief executive of the Pam Golding Property group, said that South Africa needs an injection of confidence that will stimulate the economy and drive investment.
“The tentative economic – and housing market – recovery which we have seen at the start of 2018 has suffered a temporary setback as a result of the increased tax burden and series of petrol price hikes, coupled with rising property rates and municipal tariffs such as electricity and water.
“Consumer confidence has been dented as household finances have had to adjust to reduced disposable income. Nonetheless, interest rates are relatively low and banks remain competitive and continue to show an appetite for lending, so any setback is likely to prove temporary.”
He said that Pam Golding data showed that well-priced homes under approximately R2.5 million are selling well to a cross-section of buyers, including investors.
“Nationally, however, the emphasis is on homes being pegged at realistic, market-related prices. Also in regard to our sales nationally, for the calendar year to date we have recorded a slight increase in unit sales, albeit reflecting more activity in the middle to lower price bands, with the luxury market still ticking over steadily.”
Read: The difference between the repo rate and prime lending rate explained
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