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Cape Town - Home buyers and those with mortgages will be encouraged by the 25 basis points reduction in the repo rate to 6.75%, according to Dr Andrew Golding, CEO of the Pam Golding Property group (PGP).
SA Reserve Bank (SARB) governor Lesetja Kganyago announced on Thursday that four members of the Monetary Policy Committee (MPC) preferred a reduction, while two preferred to leave it unchanged.
“Despite the economic and socio-political challenges faced both locally and globally, SA’s residential property market remains notable for its ongoing resilience and appetite for property investment," said Golding.
Samuel Seeff, chair of the Seeff Property Group, said although there is still plenty of activity to keep the property market ticking over and it is still in a better position than after 2007/2008, the market is shifting on the back of the poor political and economic outlook.
"Overall, the market is slower with fewer sales, properties are spending longer on the market, stock levels are rising and price growth is slower and stalling in most areas outside of the Cape," said Seeff.
For Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, it remains to be seen whether the rate cut will stimulate the property market. He noted that uncertain policy and the recent credit downgrades have negatively impacted consumer confidence, which has slowed the market in most areas throughout the country.
READ: Surprise cut in SA interest rates, rand hit
A slower economy and rising unemployment rate has also played a role in the property sector, resulting in the decline of freehold property prices.
“During the second quarter of the year, the average price of freehold property declined from R1 161 481 to R1 139 604. The muted inflation of freehold homes can be largely attributed to the slower South African economy and rising unemployment rate," explained Goslett.
The advice of Bruce Swain, CEO of Leapfrog Property Group, to home owners is to pay any monies saved by this rate cut into their home loans, as opposed to spending it on consumables.
"The outlook for economic growth has worsened, the rand remains vulnerable and there’s likely more political instability on the horizon, so it’s critical to pay off as much debt as soon as possible to minimise household risk,” advised Swain.
Top performing sectors
Golding said there are two main segments that currently form the backbone of property market demand, namely first time buyers and those seeking sectional title properties.
“Top performing sectors at present include the lower priced band under R1m and the smaller two bedroom sectional title market – both of which reflect the consistently strong demand from first time buyers," said Golding.
"Over and above this, steady activity continues in the middle and luxury segments of the market.”
READ: 7 'deadly sins' property investors should avoid
Demographics
According to Sandra Gordon, PGP's senior research analyst, the country's demographics are strongly positive for the housing market. The local population is young with approximately two thirds of residents under the age of the typical first-time buyer - 34 years - and therefore not yet in the housing market.
In her view, this will ensure continued strong demand from this section of the market.
“The major metro markets are likely to benefit most from this demand, since SA’s population is urbanising at a rapid pace, causing major metro populations to become both larger and younger,” said Gordon.
“Affluence is currently a source of weakness for the national housing market as SA’s economic growth remains subdued. However, economic activity remains buoyant in several major growth nodes across the country."
Cape Town, Gauteng and the North Coast of KwaZulu-Natal are all experiencing substantial private sector investment in major mixed-use developments, while government continues to invest heavily in infrastructure, in her view.
Bank loans
"On the upside, the banks are still keen to lend and today’s rate decision is good news in that regard. The banks are, though, taking a more conservative approach to approvals and deposit requirements are on the rise," said Seeff.
The Seeff group is seeing a higher approval rate compared to last year, so regards this as good news for buyers. The flat price growth also means good buying conditions especially in Gauteng and other metros.
"We hope to see some improvement in the demand on the back of the rate cut, but sellers still need to be aware of the shifting market conditions. Sellers will now need to get their house in order so to speak. Ensure your property is in the best condition possible, price it at the right level and grant a sole mandate to an area specialist if you are serious about selling," Seeff said.
"Most buyers now do their search online and will simply overlook your property if it is overpriced or listed by multiple agencies. Be mindful of not just turning down offers unless you are quite certain that you can wait. Buyers are also now looking for more negotiability."
On the whole, Seeff said the market is still holding up and well-priced property is still attracting attention.
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