The SARB's Monetary Policy Committee is set to make their interest rate announcement again on 25 January 2024.
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After a year of tightening belts and looking for ways to reduce household expenses, homeowners are likely to be awaiting the January interest rate announcement with bated breath. Thankfully, another interest rate hike is unlikely to occur at the next announcement, which is set for 25 January 2024.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that an interest rate hike would mean trouble for the property market as a whole. “Most transactions rely on home finance. When interest rates are as high as they are, fewer and fewer individuals are able to afford the higher debt repayments. We have already noticed this last year, with the industry languishing at a 25-30% drop in sales,” he notes.
On the upside, most economists seem to predict that interest rates will hold steady at the January meeting and might even drop within the first quarter of the year. “The best thing that could happen for the property market is for interest rates to start coming down again. This will relieve the financial pressure that most homeowners are experiencing and will allow aspiring buyers greater opportunity to afford to purchase property,” says Goslett.
Until such time, Goslett’s advice to homeowners is to try and keep their debt levels as low as possible, especially on the debts with higher interest rates, such as personal loans or car loans. “Funnel whatever spare cash you have towards paying off those debts first and avoid taking on any new debts if possible,” he advises.
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Those who are selling within the current market need to keep in mind that qualified buyers are harder to come by within these economic circumstances. That being said, Goslett also notes that well-priced homes marketed by a good real estate professional should have no problem selling, but buyers will need to trust the advice of their chosen real estate professional if they are to conclude a timeous sale within the current market.
His advice to real estate professionals is to keep on pushing while interest rates remain high. “Tough market conditions make even tougher real estate agents. If you can survive as a real estate professional and make sales happen in times such as these, then you can rest assured that you have what it takes to make it in this industry,” he notes.
While it is impossible to predict with any certainty what lies ahead, Goslett remains hopeful that interest rates should become more favourable for the real estate market over the course of the year. “I am hopeful that we will enter into a period of slightly more stability this year and that more opportunities will come about for buyers and sellers alike,” he says.
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High Street Auctions Director Greg Dart says while the repo rate isn’t likely to increase this month, South Africans aren’t likely to feel any reprieve either, until March or later.
“The outlook for local and global inflation is better than it has been for some time. I’m optimistic that we’ll see a rate cut in March, or perhaps early in Q2 of the year.
“South Africa – like most countries – tends to follow the US Central Bank and economists there are predicting the first rate cut to come at the end Q1. Hopefully we’ll be close behind.”
Dart says to lower interest rates would be a step in the right direction to shore up business confidence in the South African economy.
“When there’s no confidence there’s no investment, and you can see the impact from Lightstone’s 2023 property transaction data. Commercial and residential sales plummeted year-on-year, and it’s not a trend we can afford to see continue in 2024.
“Economic reform needs to start today. The time for government to talk about this plan and that, is over. It’s time for action – both in terms of grid security and with revised economic policies that are actually designed to benefit the many.”
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Lew Geffen Sotheby’s International Realty CEO Yael Geffen says the MPC is likely to leave the repo rate unchanged at its first meeting of the new year.
“The good news is there probably won’t be an increase. The bad news is the prime lending rate is probably only going to ease slightly at the end of the first quarter, or in the second quarter of the year.
“We need interest rates to come down to reinvigorate the residential property sector.
“Lightstone data released in December showed a decrease of nearly 100 000 residential transfers last year compared to 2022, with the value of trading in the sector shrinking by nearly R90 billion year on year.
“Consumers’ belts are as tight as they can get. People simply can’t afford to get onto the property ladder at current interest rates, coupled with the horrendously high cost of living in general.
“We need far more vigorous action from government this year to cut costs and get the economy moving in the right direction again.
“The MPC’s decisions are based on our country’s standing in the global economy. When the rate goes up, we can’t blame the Committee for reacting to the situation the country is in, but we can demand that the government starts acting in the interests of its citizens putting policies in place that will lead to lower rates.”
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