Seeff calls for a rate cut as property sales plummet by 25% on delays

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After a promising start to the year, property transaction volumes have now plummeted by 25% to a lowly 17,350 monthly average compared to 23,100 in 2021 when the interest rate was at 7.25%. House-price growth has also declined to below 1% nationally.

The economy was just starting to grow again when the rate was below 10%, and at 11.75% it is simply too high, and damaging to the economy and property market, he says further. We now call on the MPC to take a bold stance. Even just a 25bps cut will send a strong signal that the Bank is confident about the economy, and that better times for growth are just around the corner which will have a huge knock-on effect.

There are ample reasons for the Bank to cut the rate. It is unlikely that it will affect the rand which has strengthened, recently dipping below the USD18 barrier. The inflation outlook is much lower, and it has come down this year to within the Bank’s target range. There have also been two notable petrol-price cuts recently.

Harness the positivity

There is so much positivity in the country right now and the Reserve Bank should harness that. From the recent Springbok win to the successful formation of a Government of National Unity (GNU) and a more market-friendly cabinet. Foreign investment is flowing into SA stocks, the JSE has picked up, we are seeing good rains, and no Eskom outages for over 100-days.

The positivity should now translate into an interest-rate cut, which the market has been anticipating for at least the last three meetings. Current inflation is not a factor of over-exuberance or overspending in the economy. Holding the interest-rate high is punishing the consumer and hampering the economy which has been in a stalled mode for far too long.

This is the longest period that the interest rate has been kept at such a high level for so long. If we look back following the 2007/8 Global Financial Crisis (GFC), the Reserve Bank brought down the interest rate from 15.5% in mid-2008 quite rapidly with five rate cuts (5% in all) in 2009 to 10.5%. By 2010, SA was back at over 3% annual GDP growth.

We have seen a significant value erosion in the property market. This is concerning for the economy given that property is one economic sector with a significant multiplier effect and value chain that benefits from real estate transactions, from property taxes to agent commissions, attorney fees, movers, renovators, and so on. Positive growth in the real-estate sector is also a catalyst for further housing and infrastructure development and growth.

We have not seen this much positive sentiment for some time, but the interest rate remains a barrier, holding back any real uptick in the economy and property sales volumes and prices.