The South African Reserve Bank’s decision to keep interest rates at 7.50% is viewed as a missed opportunity for economic relief. Samuel Seeff noted that a rate cut was warranted given stable inflation levels. Despite high rates, the property market remains active, especially in the luxury sector, where confidence has increased significantly. The high-interest rate could pose risks, hampering growth and job creation.
The South African Reserve Bank’s Monetary Policy Committee has decided to maintain the interest rate at 7.50% (with a prime rate of 11%), which has been criticized by Samuel Seeff, chairman of the Seeff Property Group. He believes this decision represents a missed opportunity for much-needed relief for consumers and property buyers, potentially stimulating the economy.
Despite the US Federal Reserve’s similar move to keep rates unchanged, Seeff argues that an interest rate cut of either 25 or even 50 basis points was warranted. With inflation remaining stable at 3.2% for February, he emphasizes that conditions were favorable for the Reserve Bank to implement a reduction.
Seeff highlights that the current interest rate is still 100 basis points higher than pre-Covid levels, while inflation has significantly decreased from an average of 6% in 2023 to 3.2% recently. He points out that the high disparity between interest rates and inflation is one of the widest globally, suggesting the economy needs stimulation rather than prolonged high rates.
The existing high-interest rates may inhibit economic growth and job creation, posing a greater risk than inflation itself. Households are already facing increased costs of credit, alongside rising tariffs and taxes.
Despite these challenges, the property market has had a robust start to the year, with rising sales volumes driven by favorable mortgage conditions and an increase in the transfer duty exemption threshold. This trend presents positive signs for price recovery after a stagnant two years.
Particularly within the luxury property sector, strong interest has been observed, especially in the Cape Metro area, with both local and international buyers investing in high-value properties. This trend aligns with ABSA’s report indicating that property market confidence is at a decade-high level.
The South African Reserve Bank’s decision to maintain interest rates has raised concerns among property market stakeholders, especially in light of favorable economic conditions for a rate cut. Despite the challenges posed by high-interest rates, the property market is showing signs of resilience, particularly in the luxury sector, with rising sales and confidence. The Bank’s failure to act could hinder potential economic recovery and growth.
Original Source: www.zawya.com
