This marks the third consecutive reduction in interest rates, bringing the total relief in the current cycle to a significant 75 basis points since September 2024. Picture: Leon Lestrade/Independent Newspapers
The property industry received a boost from the decision by the South African Reserve Bank (SARB) to cut the interest rate by 25 basis points during its Monetary Policy Committee (MPC) meeting on Thursday.
This marks the third consecutive reduction in interest rates, bringing the total relief in the current cycle to a significant 75 basis points since September 2024.
With the prime lending rate now at 11%, many in the sector expressed optimism about potential homebuyers and those maintaining existing mortgages.
Dr Andrew Golding, CEO of the Pam Golding Property Group, heralded the MPC’s decision as “very encouraging news”, particularly in light of shifting expectations around future rate cuts.
“The outlook for interest rates for the remainder of the year is far less clear. The timing of any further rate cut is also debated, with some commentators suggesting March 2025 and others later in the year, Golding said.
“This is largely a reflection of the heightened uncertainty in the current global economy amidst concerns of a resurgence in inflationary pressures. 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.”
Meanwhile, Samuel Seeff, chairman of the Seeff Property Group, expressed some disappointment regarding the size of the cut.
While he welcomes a 25 basis points reduction, Seeff argued a more substantial cut of 50 basis points would have been more indicative of the pressing economic conditions.
“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 while the economy limps along, barely growing, and unemployment is spiking,” he said.
“Given that GDP growth and employment is the most critical element right now, it seems out of step for the bank to persist with the interest rate policy aimed at containing inflation between 3% to 6% when inflation is, in any event, at the bottom of the target range.”
As a result of the 25 baisis points rate cut, mortgage repayments will reduce by:
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, echoed the sentiment of optimism, suggesting that the lowered repo rate was a much-needed elixir for South African consumers.
BUSINESS REPORT