Ahead of this week’s Monetary Policy Committee (MPC) meeting, Samuel Seeff, chairman of the Seeff Property Group, is calling for an immediate interest rate cut, stating that the prolonged high rate is doing more harm than good.
Seeff warned that the high interest rates have already caused significant value erosion in both the property market and the wider economy.
Property transaction volumes have fallen by nearly 40% since 2020/2021, now at levels last seen in 2010, according to data from Lightstone.
The interest rate has remained excessively high for too long, and delaying relief any further risks exacerbating the damage already done, said Seeff.
He believes there are compelling reasons for the Reserve Bank to act, providing much-needed relief to consumers, the broader economy, and the struggling property market.
Seeff highlights that the elevated interest rates have stifled economic growth and dampened activity in the property sector. However, the economic outlook has improved notably in recent months.
The Government of National Unity (GNU) has fostered confidence, with billions of rand flowing into South African bonds, while the JSE has reached record highs over the past month.
Stable energy supply is also a positive factor for the economy, Seeff said, noting that key economic indicators are trending upward. Falling oil prices have led to reductions in fuel costs, benefiting consumers and providing further economic relief.
Since the last MPC meeting, the rand has strengthened, now trading just below R17.70 to the US dollar, while inflation has dropped to a three-year low of 4.6% in July, down from 5.1% in June, and is expected to continue declining within the Reserve Bank’s target range.
Seeff also noted that major central banks, including the Bank of England and the European Central Bank, have already reduced interest rates, with the US Federal Reserve widely expected to follow suit.
He stressed that a 50-basis point (bps) cut is crucial for the South African economy, though at a minimum, a 25bps reduction should be implemented this week.
It would be inconceivable for the Reserve Bank to ignore the economic and consumer struggles, he said.
Discussions around adjusting the inflation target are misplaced, especially when the economy is under strain and unemployment remains high. South Africa needs policies that prioritise growth, he said.
First-time homebuyers, in particular, are finding it increasingly difficult to enter the property market, while middle-class homeowners face rising bond repayments—between R1,500 and R3,000 extra per month—on top of the escalating cost of living.
With property price growth stagnating in most areas, except for the Cape, Seeff says it’s a buyer’s market. A rate cut would invigorate buyer demand, allowing them to capitalise on current flat prices, he said.
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