Samuel Seeff, chairperson of the Seeff Property Group, says it has become clear that conditions are now favourable for the Reserve Bank to cut the interest rate. The Bank of England’s recent cutting of the UK interest rate signals that it is time for the rate to come down.
Seeff says it will no doubt have a tremendous effect on the property market. There is a lot of anticipation and positivity, with both agents and buyers keen on getting the market to move faster.
A rate cut will bring relief for consumers and property buyers. In addition to lowering the cost of debt and freeing up more from household budgets, it will also bring down the cost of homes, says Seeff. Although the bank lending conditions remain strong, an uptick in the market will be a further boost for the banks.
The banks anticipate at least two rate cuts this year, with a potential 25bps cut in September and a further 25bps cut in November. This would effectively take the prime rate from 11.75% to 11.50%, and then to 11.25%.
The result will be a reduction in home loan repayments and savings as follows:
For property buyers, there is also the additional incentive that there is no transfer duty payable on the first R1.1m of the purchase price.
Seeff says there is a high desire for home ownership in the country, but the high interest rate and uncertainty around the economy remain a dampener. Bringing down the rate will be just the catalyst that hesitant buyers need.
Ultimately, the property market would like to see the prime rate come back down to around 10% to 10.5%, which would stimulate economic growth and, with that, a tremendous boost for property sales. Nonetheless, a 25bps cut would be welcome, but 50bps would be better, concluded Seeff.
Writer: Gina Meintjes
