Repo Rate Remains Unchanged

Receiving the news that the repo rate remains unchanged at a 15-year high of 8.25%, with the prime lending rate at 11.75%, was akin to hearing the sound of the Carte Blanche jingle on a Sunday evening after a carefree long weekend. Many South Africans have been basking in the glow of the Rainbow Nation reuniting under the GNU. The country seems to have been reset to winter factory settings, with the Bokke playing to packed-out stadiums, KZN basking in sunshine, the Cape donning its raincoat, and Gauteng offering blue skies with a guarantee of frost. We Saffas have a reason to feel a little smug at the moment-at least until we received the dreaded news of our interest rates remaining high. Just like when we hear the Carte Blanche song, we realise that we have looming responsibilities.

However, if one can look past the current feeling of angst, you realise that, just like the time of year, we are literally at the top of the curve, and everything is downhill from here. Two of the six SARB committee members voted for the repo rate to be cut by 25 basis points, which is a strong indication that the rate will be coming down. This opinion is shared by South Africa's retail banks, with the majority predicting a 25 basis point cut in September, to be mirrored in November with another 25 basis point drop. As the country heads into a South African summer holiday, we can all look forward to a further 50 basis point drop in the first half of 2025. Marek Raczko, a strategist at Barclays, was recently quoted in a Business Tech article: "We expect SARB to deliver 50 basis points worth of cuts this year, followed by another 50 basis points next year, amid falling inflation and better risk sentiment toward ZAR and South African assets," said Raczko.

The Reserve Bank's prudent approach to monetary policy has brought down our headline consumer inflation, which is on its way to moving below SARB's target mid-point of 4.5%. This means the increase in the pricing of the goods and services we consume is slowing. In addition to this, Cyril Ramaphosa announced at the formal opening of Parliament on Thursday, 18th July, the government's commitment to curbing the cost of living, most notably the cost of petrol, reinforcing the Reserve Bank's good work.

All of this, combined with the lights remaining on and international investment returning to the country, points to a positive economic outlook for the next 18 months and a return to increased demand in the residential property market across the country, which will lead to an increase in property prices across the board.

Any property investor should be looking at the current situation and only seeing opportunity. The three years of increasing interest rates, albeit from a record COVID-induced low base, and the 15-month record high interest rate plateau have caused price stagnation. South African residential property as a whole is offering incredible value, and with the aforementioned cost of debt decreasing at a descending rate against a positive economic outlook, buyers can make a confident financial decision. Any prospective Cape Town buyers assuming prices can't increase any further are unfortunately mistaken. Although semigration may slow due to better expected governance in other parts of the country, the good news emanating from the Republic is only going to increase the size of both the international market and the South African diaspora returning home, with the Cape Town being the favoured destination.

Contact HUNT Properties today to explore your investment opportunities in the South African real estate market.