SARB keeps repo rate steady at 8.25%

The announcement by the MPC that the repo rate would remain unchanged at 8.25% – meaning that the prime rate holds steady at 11.75% – was disappointing for consumers with significant borrowings, including those with existing mortgages as well as first-time home buyers.

With inflation at a four-month high, rising to 5.6% in February from 5.3% in January 2024, this is the fifth consecutive MPC meeting where the repo rate has remained stable.

Dr. Golding says: “Although the resilience of the residential property market continues to shine through despite the current weak economy and financial pressures faced by consumers, with FNB and Pam Golding Properties’ own data reflecting that buying activity has trended higher in recent months, some respite in the form of a reduction in the interest rate would have gone a long way to bolster confidence and sentiment in the market.

With a weak economy and the uncertainty ahead of the general elections, it is currently a challenging environment for the housing market – which is awaiting interest rate relief. Nonetheless, life goes on – children need to go to school, couples marry and people accept jobs in new locations – all of which translates into property-related decisions, which include returning expats. We are also seeing renewed interest from international buyers, which incorporates those from the rest of Africa.

“Positively, market commentators are still anticipating that interest rates are likely to begin to decline later this year, providing a boost in confidence and general market sentiment. This provides comfort for those who can afford to purchase a home in the current environment, particularly as there are still value-for-money opportunities in many areas around the country. However, the market is not a one-size-fits-all situation but rather based on specific and particular supply and demand factors in almost every area and suburb across all regions. Certainly, there is a strong appetite for investment property – particularly in the Western Cape – showing a continued belief in the value of property investment.

“The recent interest rate hiking cycle – which began in November 2021 and ended in May 2023 and resulted in 475bps of rate hikes, was aimed both at normalising interest rates – which had been slashed to historic lows during the pandemic – and at containing the inflationary pressures unleashed first by the pandemic (notably supply chain disruptions) and then by assorted other factors including the war in Ukraine coupled with the disruption this caused to food and energy markets.

 Unchanged repo rate suggests greater stability

Tyson Properties CEO, Chris Tyson, has welcomed the announcement by the South African Reserve Bank’s Monetary Policy Committee to keep the repo rate steady at an  unchanged 8.25%.  This comes despite an increase in inflation in February to 5.6% which is close to the top of the Reserve Bank’s preferred 3-6% range.

Tyson said that the stability that was evident in the Reserve Bank’s stance ahead of the May general election was good news for the property market which was also holding steady in major centres. Like most economists around the country, Tyson remains optimistic that there could be a rate cut during the third quarter of 2024, a move that would be good news for the economy as a whole, as well as for job creation and the property market.

Meanwhile, he says the property market in Cape Town remains strong and the positivity that is evident in both KwaZulu-Natal and Gauteng is encouraging. Post the election and in the event of a much-anticipated drop in interest rates, he expects a surge in first time home purchases as well as a continued upward trend in property transactions countrywide.