Property group urges SARB to cut interest rates for economic growth and job creation
Lower interest rates will reduce the cost of financing homes, thus enabling a higher affordability at a given monthly financing payment.
Image: Simphiwe Mbokazi / Independent Newspapers.
A South African property group has reiterated its call for the South African Reserve Bank (SARB) to step in with an interest rate cut as a vital stimulus for economic growth and job creation.
National year-on-year house price inflation has maintained a modest pace of 2.8%, according to the latest figures from Lightstone's Property Index. This steady, albeit sluggish, trend is echoed in the RE/MAX National Housing Report for the first quarter of this year, which reveals a 2.1% increase in average house prices compared to the same period in 2024.
With Consumer Price Inflation (CPI) sitting close by at 2.7% as of March, these figures paint a nuanced picture of South Africa's residential property landscape.
As the economy stands at a pivotal juncture, a robust cut of at least 25 to 50 basis points is not just desirable but a critical imperative, according to Samuel Seeff, chairman of the Seeff Property Group.
He said the country simply can no longer bear keeping the interest rate so high for so long. As it is, he said the overly cautious approach by the bank has missed at least two opportunities to provide relief to consumers and the economy.
'The pressing challenge of unemployment simply can no longer wait. A decisive move by the SARB now would signal a commitment to revitalising economic activity. It would also provide much-needed support to businesses and consumers, and facilitate an environment conducive to investment and job creation,' Seeff said.
The property group said the case for such monetary easing is strongly supported by the current inflation landscape. It said despite the recent benign increase in inflation to 2.8%, it remains comfortably below the Reserve Bank's 3-6% target range.
Despite headwinds out of Washington, it said the rand has also strengthened to below R18 to the US dollar.
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At the time of the open yesterday, the USDZAR traded at R17.88, according to Reezwana Sumad, research analyst at Nedbank CIB.
'The USDZAR traded steadily weaker over the course of the session to close the session at R17.92. Since the close last night, it has traded incrementally weaker, and the USDZAR is trading at R17.98 currently this morning.
"The major currency pairs have also lost ground to the USD, with the EURUSD trading at 1,1305 this morning and the GBPUSD at 1,3470. Possible trading range for the USDZAR today(Wednesday) is R17,80 to R18.15,' Sumad said.
She added that the local markets have traded cautiously over the week thus far and are likely to remain so ahead of the SARB's MPC. On the international front, she said headlines from the US continue to provide the catalyst for market activity.
Seeff said the prevailing remarkably low inflation level indicated that demand-side pressures are relatively subdued and the risks of igniting an inflationary spiral through a rate cut are minimal at this stage.
He said the stability of the currency provides further mitigation, thus providing a valuable window for the SARB to implement a more accommodative monetary policy stance that directly benefits the domestic economy.
According to data analysed by Lightstone, which evaluated property bought by a natural person and where the transaction was for a single property, young homeowners are entering the market later than they did in the past, and are opting for bonded, secure living.
In 2024, people aged between 20-35 (youth) accounted for 30% of residential property purchases, down from 36% in 2019 and 41% in 2014, with tough economic conditions and changing lifestyles cited as the likely reasons behind the shift.
While youth accounted for 30% (52 500) of residential property transactions in 2024, it was the second largest group behind the Settled category (36-50) at 43% (76 000). The Mature category (51-64) (38 000) accounted for 21%, while the Pension category (65 and older) accounted for 6% (10 000).
While the recent rate cuts have provided some relief, Seeff said the benefits have now been eroded by keeping the interest rate at least 100 basis points above the pre-Covid rate. He said time is ticking and the country simply can no longer wait.
Seeff said there is now a golden opportunity for the bank to act boldly within the available monetary policy space to address the urgent needs of economic recovery and expansion without jeopardising its price stability mandate.
A rate cut would inject much-needed momentum into the economy by lowering borrowing costs for businesses and stimulating investment while adding more money into the pockets of consumers to spend in the economy, he said.
The property group said while a 25bps cut would be most welcome, they urged the Bank to provide a more robust cut of at least 50bps as an immediate injection of economic confidence to kickstart the economy.
'Naturally, the property market, which currently lags the pre-Covid volumes, will also benefit from a more pronounced rate cut. Aside from enabling more first-time property buyers to get into the market, it is an important economic contributor with a significant economic multiplier benefit,' Seeff said.
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