Interest Rate cut to 11.5%

In a move widely predicted by REI and industry in the South African Reserve Bank Monetary Policy committee cut the prime rate lending rates from 11,75% to 11,5% giving much needed relief for starting the

Property owners and landlords can breathe a sigh of relief with the news that the prime lending rate drops for the first time since November 2021. After months at a 14-year high, the repo rate will drop to 8%, bringing some much-needed financial reprieve for consumers. Industry weighed in on their sentiments.

Dr. Andrew Golding – CEO, Pam Golding Property Group

Golding views the recent interest rate cut as the start of a downward cycle, boosting consumer confidence, which is at a five-year high. This cut, along with lower inflation and fuel prices, will improve disposable income and ease financial strain. Golding expects further rate cuts to follow, enhancing housing affordability, especially for first-time buyers and loan-dependent purchasers.

He remains optimistic about the residential market's recovery over the next 12-18 months, with the luxury property segment, particularly in the Western Cape, showing continued resilience amidst improving economic conditions.

Lynne Krawchuk, CEO of Under One Roof,

Krawchuk , expresses optimism about the recent rate cut's widespread positive effects. She highlights that the lower borrowing costs will attract first-time buyers and investors, particularly boosting demand in areas with affordable housing and high rental yields.

She advises that now is an opportune moment for hesitant buyers to enter the market, anticipating that competition will intensify as more people capitalize on favourable lending conditions. She also notes a potential increase in property listings, suggesting that sellers price their homes competitively and consult estate agents to ensure they stand out in a potentially saturated market. This rate cut is expected to reinvigorate the market, much to the relief of estate agents.

Berry Everitt, CEO of Chas Everitt International Property Group

Everitt, highlights the positive effects of the interest rate cut on the property market, which has already seen growth in demand and sales in 2024. He notes a year-on-year increase in home loan applications and approvals, as well as a steady rise in home prices.

With economic growth expected to hit 2.2% in 2025 due to government reforms, investor confidence is rising. Everitt predicts a resurgence of first-time buyers, driven by further rate cuts, job creation, and major infrastructure projects, advising buyers and investors to act now to benefit from property price growth.

Samuel Seeff, chairman of the Seeff Property Group,

Seeff, expressed his positive outlook on the Reserve Bank’s 25bps interest rate cut, which lowers the repo rate to 8% and base home loan rate to 11.5%. Although he had hoped for a 50bps reduction.

He remains optimistic about future cuts, citing global trends and a favourable local economic environment. With inflation at 4.4% and the Rand strengthening, he anticipates growth in the economy and property market. The rate cut is expected to enhance home affordability and stimulate market activity. He encourages buyers to seize current opportunities, especially in Gauteng and KZN, predicting rising prices as competition increases.

Bradd Bendall, Sales Director at Better Bond

Bendall welcomed the anticipated rate cut, attributing it to the steady decline in consumer prices and inflation nearing the Reserve Bank’s target range. He is optimistic that this reduction will positively impact the housing market by increasing property investment opportunities.

Better Bond has already observed a 6.5% rise in bond applications quarter-on-quarter and anticipates continued growth if the prime lending rate remains on a downward trajectory. Bendall views this rate cut as a promising sign for the property sector, potentially boosting market activity and accessibility for more buyers.

Chris Tyson, CEO of Tyson Properties

Tyson welcomed the South African Reserve Bank’s 25bps rate cut, lowering the repo rate to 8%. He views this as the start of a rate cut cycle, with another reduction anticipated by year-end. Tyson advises homeowners to capitalize on the lower rates by maintaining pre-cut repayment levels, potentially shortening the bond term by around 2.5 years on a R1 million bond.

He expects further cuts totaling approximately 2% by the end of 2025, which could transition the market from a buyer's market to a balanced one. The rate cut, coinciding with spring, should energize the 2024 summer property market.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa

Goslett, welcomed the recent interest rate cut, describing it as a much-needed relief for the housing market. He believes this reduction could spur house price appreciation, which has been subdued due to high rates since May last year.

While the impact on consumer sentiment will be immediate, Goslett notes that the full effect may only be felt in 5-12 months. He cautions that delaying investment could lead to higher demand and rising prices. If further cuts occur, buyers could benefit from lower mortgage repayments and increased financial flexibility.

David Jacobs, Rawson Property Group

Jacobs sees the recent rate cut as beneficial for homeowners and first-time buyers. For existing homeowners, the 0.25% reduction in prime-linked home loans will slightly ease financial pressure. Jacobs advises homeowners to maintain higher repayments to reduce overall interest and create a financial cushion.

The cut is expected to enhance affordability for first-time buyers, potentially boosting activity in lower to middle price brackets. Jacobs anticipates a resurgence in the property market, particularly for homes priced between R1 million and R2.5 million. Additionally, the rental market may see shifts as some tenants transition to homeownership, creating opportunities for well-positioned landlords.

Stephen Whitcombe, MD of Firzt Realty group.

Stephen Whitcombe, MD of Firzt Realty Group, highlights the real estate sector’s positive response to the Reserve Bank’s 0.25 percentage point cut in interest rates, reducing the repo rate to 8% and the prime lending rate to 11.5%.

Whitcombe views this as the beginning of a potential rate-cutting cycle that could see the prime rate fall below 10%, barring unexpected global or local disruptions. With inflation easing to 4.4% in August, below the Reserve Bank’s 3% to 6% target range, and a strong Rand, further rate cuts are anticipated.

Conclusion

For property owners, this rate reduction means immediate savings on monthly repayments, boosts residential optimism, reducing default risk and offering a chance to pay off loans faster, potentially saving thousands in interest. Property buyers benefit from improved affordability, with lower income requirements and deposit expectations.

Investors gain from increased ROI and asset appreciation, while property developers see heightened demand and cheaper borrowing costs, boosting market activity and economic growth.