Repo rate cut welcome boost for property market

03 April 2018

The decision by the Monetary Policy Committee of the SA Reserve Bank to cut the repo rate by 25bps from 6.75% to 6,50%, taking the base home loan rate from 10.25% to 10%, is a welcome boost for the economy and property market.

"This will provide much needed stimulation for the market and, after a very flat 2017, will hopefully be an energy boost to encourage buyers and investors," says Samual Seeff of the Seeff Property Group.

Although the rate cut was largely expected, Seeff said that it is a welcome reprieve for consumers and property owners who face higher living costs due to the 1% VAT hike taking effect on the 1st April.

Things have moved quite fast since the last interest rate meeting. The election of Cyril Ramaphosa as President of the ANC and of SA has been a very positive development for country, economy and property market.

Action around State Capture, the prosecution of Jacob Zuma and the Cabinet shuffle to return confidence to major sectors of government have all been well received by the market, business and the ratings agencies. Moody's has for example just announced that it is keeping SA's sovereign credit rating at investment grade and upgraded the economic outlook to positive.

Currently, inflation is at around 4% which is within the Reserve Bank's target range of 3-6%. The Rand also continues to perform well although it is always subject to a degree of volatility.

Seeff said further that these developments are good news for the property market. While the outlook for 2018 is much better than last year, it remains largely a buyers'market for the time being and sellers need to maintain a more conservative approach to their price expectations.

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