Rate cut should've been bolder to kickstart economy, property market

25 July 2019

While welcoming the decision by the Monetary Policy Committee (MPC) of the Reserve Bank to cut the repo rate by 25 basis points to 6.50% (reducing the base mortgage lending rate to 10%), the bank should have been bolder and opted for a 50bps cut.

At a time when the economy and property market are really struggling, we needed courage. A bolder rate cut is already factored into the currency and the Reserve Bank should have done more to inject impetus to support President Ramaphosa's reforms to get the economy and confidence back on an upward trajectory.

Sentiment remains worryingly low and the market needed a much stronger message. Consumers are struggling and it has been a tough year with rising costs and a weak economic and growth climate. We need real reprieve of some of the economic pressure faced by consumers to free up more disposable income and entice them back into the property market in numbers.

Huge opportunity for buyers

Thus far, we have not seen any real sign of the economic improvement or uptick in property sales that was expected following the elections, despite the phenomenal buying conditions. There is now a huge opportunity for buyers. Stock levels are up considerably. Prices are flat and coming down in many instances while sellers are negotiating, and the banks prepared to give loans. This is the time to buy.

The market seems to be in a similar phase to the 1992-1993 period, just before the 1994 elections when there was a great deal of hesitation. Right now though, the interest rate is considerably lower. Those who bought during that 1992/3-lull will tell you that they bought at just the right time and have benefited greatly from capital value growth.

For buyers in a position to buy right now or wanting to upgrade, the winter is an ideal time to take advantage of the favourable market conditions. It is a good time to start shopping around ahead of the new school and university year and you are likely to find a willing seller and can negotiate right now, but don't wait too long, the window of opportunity may not last.

Article published courtesy of BIZCommunity

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