The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) is expected to announce an interest rate reduction during its meeting on Thursday, September 19.
According to the SARB, since 2021, the MPC has increased interest rates by a significant 475 basis points (bps) in response to serve inflationary pressures that impacted the South African economy post Covid-19. This pushed the repo rate to a 15 year high of 8.25%.
A potential reduction in the interest rate by the SARB would greatly affect the property market in South Africa. Such as making home loans more accessible and likely increasing buyer activity. This could drive higher demand, particularly in sought-after areas, pushing property prices upward.
Lower interest rates may also encourage investors, both local and international, to enter the market, further stimulating growth.
Nick Pearson, of Tyson Properties in the Western Cape stated that interest rates have been “unusually high” and a clear reason for this is inflation.
However, now that inflation is beginning to stabilise, along with the positive outcome of the national elections, interest rates are set to drop more than once this year and potentially again next year.
There was a lot of mixed sentiment around where this country was going before the election. However, the formation of the new GNU government has put more faith in South Africans to invest in their own country instead of sending their money offshore. Nick predicts that the interest rate will drop by 25 basis points and believes that semigration will continue into the Western Cape.
“As a result of the good governance by the DA in the Western Cape, there continues to be a rise in semigration,” Nick emphasised. These changes are making it a safer environment for foreign investors to buy into the property market of the Western Cape. Nick states that there will be an increase in the number of transactions between the R750 000 and R3 500 000 price bracket, specifically in the Western Seaboard and the Northern Suburbs of Cape Town.
This will be an especially ideal time for young first-time home buyers to get into the market. “The sooner you get into the market the better,” Nick advised. He mentioned that he has noticed that since the interest rate started rising, there has been a decrease in first-time home buyers. However, he expects this to change now that the interest rate is potentially going down.
As a first-time home buyer, you should consider where you are in this stage of your life. For young couples thinking of starting a family, the Northern Suburbs or the Western Seaboard would be a great place to start. If it’s an already established family, the Southern Suburbs is “an amazing place to purchase,” Nick stated. Young professionals or investors on the other hand, should rather consider investing in Cape Town City Centre, in areas like Gardens, Sea Point or Green Point.
For investors and sellers alike, now would also be an opportune time to sell your property. “If you’re thinking of selling there could not be a better time to put your property on the market than now,” Nick said.
“The Western Seaboard will see a lot more of semigration coming in from provinces, such as Gauteng and KwaZulu-Natal,” Nick stated. This means that the increased demand for property in the Western Cape can lead to quicker sales and potentially higher selling prices, which will benefit sellers in a competitive market. Additionally, the favourable financing conditions may attract a broader pool of buyers, making it an advantageous time to capitalise on current market trends.
On the other hand, if you’re an industry professional, real estate agents need to become active on a variety of platforms to promote their stock, instead of only relying on the traditional platforms. Maximising their visibility and reaching a broader audience will allow them to increase their chances of finding qualified leads, accelerating sales and building a brand in a competitive market. It is going to be very important for real estate agents to put themselves out there to potential buyers. “Agents need to evolve,” Nick explains.
Along with this, the most important thing for real estate agents is finding stock to have on the market. As the saying goes in real estate, ‘He who controls the stock, controls the market’.
The South African economy has seen a lot of positive changes this year and if the interest rate drops, it will serve as the “catalyst” that sets the property market in the Western Cape to soar this summer.
