The delay in cutting interest rates is doing more damage than good to the economy and property market, according to Samuel Seeff, chairman of the Seeff Property Group.
Seeff said that following a promising start to 2024, property transaction volumes plummeted by 25%.
Transaction volumes for 2024 were averaging 17,350 monthly in comparison to 23,100 in 2021 when the interest rate was at 7.25%. House price growth has also dropped to below 1% across the country.
“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,” Seeff said.
“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.”
According to Seeff, there are enough reasons for the South African Reserve Bank (Sarb) to cut interest rates.
Seeff said that it is unlikely that the rand will be impacted, after it dipped below R18 to the dollar this week, while the inflation outlook is much lower, and it has come down to sit within the Reserve Bank’s target range, plus there have been recent fuel price cuts.
There is so much positivity in the country right now and the Sarb should harness that.
From the successful formation of a Government of National Unity (GNU) and a market-friendly cabinet, to foreign investment flowing into SA stocks, the JSE picking up and no load shedding for more 100 days, it all points to good days for SA.
According to Seeff, all this positivity should now translate into an interest rate cut, which the market has been waiting for, for at least the last three meetings.
“Current inflation is not a factor of overexuberance or overspending in the economy, and holding the interest rate high is punishing the consumer and hampering the economy which has been in a stalled mode for far too long,” Seeff said.
Seeff said that this is the longest period that the interest rate has been kept at such a high level. The high interest rates have caused 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 a value chain that benefits from the following:
- real estate transactions
- property taxes
- agent commissions
- attorney fees
- movers
- renovators
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 which is holding back any real uptick in the economy, and property sales volumes and prices,” Seeff concluded.
IOL Business