Big win for South Africa’s property market – but not for everyone

Experts in the property market have welcomed the South African Reserve Bank’s (SARB’s) latest decision to keep interest rates on hold.

Despite a close three-to-two call, the bank’s Monetary Policy Committee (MPC) chose to keep the repo rate at 8.25%, with the prime lending rate at 11.75%.

SARB governor Lesetja Kganyago noted that headline inflation had reduced significantly over the last couple of months but expressed concerns over the future outlook, with inflation ticking up from 4.7% in July to 4.8% in August.

Samuel Seeff, chairman of the Seeff Property Group, Dr Andrew Golding, chief executive of the Pam Golding Property Group and Tyson Properties’ chairman Chris Tyson and chief executive Nick Pearson all welcomed the decision from the SARB’s MPC.

“While the SARB governor continues to signal that the Reserve Bank is ready to hike rates further, if necessary, it seems likely that with inflation expected to remain within the inflation target during the remainder of the year (2023) and during the course of next year, the bank has sufficient scope to leave rates unchanged and that the interest rate cycle has therefore peaked,” Golding said.

However, he admitted that there are dangers to the inflation outlook which could influence interest rate decisions in the future, including a higher oil price, rebounding food prices and load shedding.

“Given the ongoing upside risks to the inflation outlook, the bank may well not hike rates further but rather err on the side of caution by keeping interest rates higher for longer – in other words, cut interest rates later than some economists are expecting,” he said.

However, Seeff argued that the economy needs stability and that the Reserve Bank cannot even consider hiking rates any further.

“It is exerting unnecessary pressure and essentially punishing consumers for something beyond their control,” he said.

“After three years of economic stress, we cannot endure any more. The economy needs a vital boost, and if anything, we would like to see a 25bps drop in November ahead of the retail season.”

Winner and losers

Following a slow inter period, Seeff said that the market should become more active in summer as more international buyers return to the coast. This view was also supported by Tyson’s leaders.

“We expect a busy summer. Another interest rate hold will give buyers far more peace of mind when it comes to property transactions. We expect to see more first-time buyers back in the market as well as an increase in the number of transactions under the R3.5 million threshold,” Pearson said.

That said, the upside of the market will continue to favour buyers.

“Although facing a higher interest rate, buyers can generally find a good deal, and if they can afford it at the current interest rate, they will benefit once the rate comes down again,” Seeff said.

Sellers are thus likely to struggle in the current market conditions, with buyers setting the pace of sales due to larger stock to choose from and fewer buyers.

“Properties are now taking much longer to sell, and serious sellers still holding out right now may risk losing out,” Seeff said.

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