Samuel Seeff,
Chairman
Seeff Property Group
Ahead of this week’s meeting of the Monetary Policy Committee (MPC) of the Reserve Bank, Samuel Seeff, chairman of the Seeff Property Group, says the time has now arrived for an interest rate cut.
The interest rate has been too high for too long and cannot be delayed any longer. It has caused more damage than good. Seeff says there are more than adequate reasons for the Reserve Bank to provide interest rate relief to benefit consumers, the economy, and the property market.
The higher-than-necessary rate is hampering growth in the economy and property market. The economic outlook has improved visibly, and we see the benefits of the Government of National Unity (GNU) in aspects such as billions of rand flowing into South African bonds. At the same time, the JSE has hit record highs over the last month.
The uninterrupted energy supply will further benefit the economy. Economic indicators have also improved, with aspects such as the falling oil price leading to petrol price cuts, which further benefit consumers and the economy.
The Rand has strengthened since the last MPC meeting and is now trading slightly below 17.7 to the US dollar. Inflation, too, has hit a three-year low (4.6% in July from 5.1% in June) and is expected to come down further to within the Reserve Bank’s target range.
Seeff adds that leading central banks have cut their rates in recent months including the Bank of England, and the European Central Bank providing a second recently. The US Fed is also expected to cut the rate this week following the decline of US inflation to a three-year low, with some punting the potential of as much as a 50bps cut.
While the South African economy desperately needs a 50bps cut, Seeff says that we should, at the very least, see a 25bps rate relief from the Reserve Bank this week. It is almost unthinkable that the Bank would remain tone deaf to the plight of the economy and consumers.
Talk of adjusting the inflation target also seems out of step during the current time with the economy struggling and unemployment continuing to rise. South African needs growth focussed policies.
First-time homebuyers are struggling to get into the market while middle class homeowners have had to absorb additional monthly bond repayments of up to R1,500 to R3,000 more per month in addition to the higher cost of living and other credit commitments.
Seeff notes that there has been significant value erosion in the property market and the economy as a whole. As a result of the high interest rate, transaction volumes have declined by nearly 40% since 2020/2021, and are effectively now down to levels last seen in 2010 according to Lightstone.
With price growth stalled across most areas, except for the Cape, Seeff says the market is particularly favourable for buyers right now. A rate cut will boost buyer demand, and buyers should be able to benefit from the current flat prices.
