South Africa

Interest rate disappoints as second wave could eat into property and economic gains

The decision by the South African Reserve Bank (SARB) to retain the repo rate at 3.5 percent (home loan base rate at 7 percent) is disappointing for the economy and property market.

There is ample reason for a cut given the split decision and missed opportunity in November. Since then, the Rand has strengthened and inflation dipped to 3.1 percent, the lowest in 16 years. Although expected to rise, analysts believe it will remain below the midpoint of 4.5 percent providing enough reason for a rate cut.

We have seen what last year’s rate cuts did for the economy and property market with better than expected results during the second half of 2020, says Seeff. While the property market is poised to continue its buoyancy, we now again find ourselves with tighter lockdown restrictions amid a second wave resurgence of the Covid Pandemic.

The risk of the Reserve Bank not taking the opportunity to provide a stimulus is that the economic impact on employment and household finances could start eating into the gains made last year. While we have not seen the anticipated levels of distressed sales, the longer the Covid Pandemic lingers, the higher the risk.

We entered December with a buoyant market, predominantly in the low and mid-price sectors to R1.8 million (R3 million in some areas). Even the top end saw good movement in the R10 million to R20 million range towards late 2020 with Seeff’s scooping several sales above R20 million in December.

Characteristically, the market tapered down at year-end. While too early to tell whether we will see the same level of buoyancy this year, the Seeff Group remains upbeat provided the interest rate remains favourable and economy can reopen fully soon.

Ultimately, says Seeff, government needs to get on with a vaccination programme with some urgency to limit the economic fall-out from the lockdown. The longer it lingers, the higher the risk of rising inflation and distressed properties which could lead to tighter bank lending criteria and higher deposit requirements. This would inevitably impact on activity in the low and mid-price ranges.

Nonetheless, we enter 2021 with a great buyer’s market, especially in the low to mid-market areas to R1.8 million (R3 million in some areas) and selectively in the upper price bands and sellers should be able to find interested buyers provided they price correctly.

Samuel Seeff, chairman of the Seeff Property Group

BUSINESS REPORT ONLINE

Football news:

Gattuso was fined 3 thousand euros for blasphemy
Burnley will ask for 50 million pounds for Pope. The goalkeeper is Interesting to Tottenham
Gladbach midfielder Neuhaus would like to move to Liverpool, his compensation is 40 million euros. Bayern are unlikely to fight for a player
Sampaoli took charge of Marseille. Contract - until 2023
Carlos Bianchi: PSG can score 5-6 goals for Barca in the second leg of the Champions League
Director of Shakhtar Srna about Roma in the 1/8 finals of the Europa League: Chances 50-50
Eintracht's forward Silva scored his 19th Bundesliga goal. Lewandowski has 26 goals, Holand has 17