SARB should keep the repo unchanged, says Seeff
The interest rate is too high. It is stymieing economic growth and driving unemployment and higher debt levels, and it is now enough, says Samuel Seeff, chairman of the Seeff Property Group.
While we are aware that Reserve Bank Governor, Lesetja Kganyago, has signalled that a further 25-basis points hike may be necessary to curb inflation, the SARB is urged by the Seeff Property group to consider holding off and keeping the repo rate unchanged at 8.25%.
Seeff says the burden on consumers, homeowners and buyers is simply too high. On top of electricity and other hikes, they have already had to absorb 475bps in rate hikes and are being “punished” when current inflation is not due to domestic spending, but is largely imported.
Inflation has in any event been coming down and hit an unexpected 13-month low of 6.3% in May 2023 while the Rand-Dollar rate appears to have stabilised. In reality, the higher interest rates have done more harm than good.
He says the high rates have exacerbated the weak economy which needs a kickstart. The SARB should now start looking at bringing the rate down. Economists such as Prof. Chris Malikane from Wits also recently spoke against another rate hike stating that SA’s important economic block, the middle class, is facing too much pressure.
Seeff says property sales volumes are down as the market reflects the interest rate hikes. Even the Cape market, which has been strong, is seeing a decline in sales volumes as fewer buyers are now active. The burden is now simply too high for consumers and home buyers.
The market is becoming challenging for sellers and first-time buyers. Overall, Seeff says we are undoubtedly in a buyer’s market. Sellers now need to price accurately as buyers are able to dictate prices.
For buyers, this could be one of the best times to buy. Seeff says it feels similar a bit like the period before the 1994-elections and the 2008-Global Financial Crisis. Those who had bought in 1993 or 2006/7 with the perceived risk at the time, subsequently benefited greatly from good capital growth which followed.
The interest rate will come down again. Prices are flat and the banks are still lending, albeit that buyers will have to budget for the higher rate right now. He says staking your claim in the property market right now could very well stand you in good stead.