Stability Prevails: Prime Rate holds firm through 5th consecutive MPC Meeting as Industry Weighs in

Today’s announcement by the Monetary Policy Committee (MPC) that the repo rate would remain unchanged at 8.25% meaning that the prime rate holds steady at 11.75%. The real estate industry weighs in.

Pam Golding Properties

This was disappointing for consumers with significant borrowings, including those with existing mortgages as well as first-time home buyers, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

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.

Says Dr Golding: “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.

RE/MAX

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that this announcement is disappointing. “We were expecting to see interest rates drop by at least 0.25% within the first quarter of the year.”

We can now only hope that it will still happen within the first half of the year. The consolation is that interest rates did not increase any further. “As high as interest rates are, at least we are nowhere near the 15.5% (Prime) we experienced during the crash back in 2018,” he notes.

Lansdowne Property Group

Landsdowne Property Group, one of South Africa’s largest residential real estate managers with over 35 000 apartments and freestanding clusters under management, says cutting interest rates would help stimulate the residential property market.

Commenting on today’s interest rate decision, Jonathan Kohler, founder, and CEO of Landsdowne says: “The property market needs a cut in interest rate to stimulate and increase sale volumes.

“We continue to see increased activity especially in the Western Cape, mainly driven by semigration as many homeowners relocate from Gauteng and KwaZulu-Natal in search of quieter lifestyles.”

OOBA Group

Contextualising the South African Reserve Bank’s decision, ooba Group CEO Rhys Dyer notes that both the American Federal Reserve and the European Central Bank (ECB) have indicated that they are close to cutting rates, but “that they’re awaiting more data – particularly wage data - to confirm that now is the right time to adopt this course of action.”

He adds that, "there remain real fears of a resurgence of inflation, so the world’s major central banks are going to err on the side of caution until they receive additional data to indicate that inflation will recede into target ranges, ensuring that the decision to cut rates is a considered one.”

However, both have hinted that rate cuts will likely begin in June, increasing the likelihood of South Africa following a similar course from mid- 2024.

Tyson Properties

Tyson Properties CEO, Chris Tyson, has welcomed today’s 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.

Mortgage Max

"Today's announcement comes as no surprise as the Reserve Bank has indicated in recent weeks that it will only look at implementing a measured rate cutting cycle once inflation stabilises around 4.5% - the midpoint of its target range," says MortgageMax CEO, Jors van Niekerk.

"This is the fifth consecutive time that interest rates have been kept on hold which will be a nice 'sweetener for consumers just ahead of Easter," he adds.

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