This week’s decision by the Reserve Bank to keep interest rates unchanged brings a welcome measure of stability for both existing homeowners and prospective buyers, with the repo rate holding at 6,75% and the prime lending rate at 10,25%.
While some market participants had hoped for a further cut, SARB’s cautious approach was widely anticipated in the light of the newly adopted 3% inflation target and recent discussions around the scrapping of the prime rate, says Berry Everitt, CEO of the Chas Everitt International property group.
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“Importantly, today’s decision also needs to be viewed in context. Homeowners and buyers are already in a significantly better position than they were at the start of the current rate cutting cycle in September 2024. Multiple reductions have translated into lower monthly bond repayments, improved affordability and increased confidence among buyers who had been sitting on the sidelines.
“And for prospective purchasers, easing inflation and a more supportive macroeconomic backdrop continue to strengthen the affordability case, even without a rate decrease this month.”
The Reserve Bank also believes inflation has peaked and is now on a downward trajectory, which supports expectations for further rate cuts later this year, he says. “As inflation moderates further, borrowing conditions are likely to become even more favourable, even if the path remains gradual.
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“There are also encouraging signals on the cost front. A strong Rand and relatively low oil prices are helping to contain fuel, transport and related input costs, providing more relief to household budgets. And while risks remain around food inflation and potential increases in administered prices such as electricity later in the year, these pressures are being partly offset by a healthier fiscal position.
“With SARS reportedly being well ahead of revenue collection targets for the current financial year, consumers may avoid any income tax hikes in the upcoming Budget, preserving disposable income.”
Taken together, says Everitt, unchanged rates, past interest rate cuts, easing inflation and supportive external factors suggest a steadily improving environment for property buyers and homeowners alike. “The overall affordability outlook for residential property is definitely trending in the right direction, and that bodes well for an increase in demand and a rise in average values, particularly in desirable areas where there is already a shortage of stock.”
