Homeowners, buyers, sellers, and those in the South African property market are eagerly anticipating next month’s interest rate decision, hoping for favourable news, Cape {town} Etc reports.
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In recent years, experts, including those from Jawitz Properties, have noted a decline in home values, affecting people’s ability to build wealth and plan for retirement, as many rely on property equity for their retirement savings.
The residential property market in South Africa faced significant challenges at the beginning of the Covid-19 pandemic, with buying and selling halted and the deeds office closed for three months. Although the market has since shown signs of recovery, it continues to face difficulties.
Herschel Jawitz, CEO of Jawitz Properties, points out that high inflation, consumer pressure, weak confidence, and low economic growth still impact the sector.
According to Business Tech, during the pandemic, the South African Reserve Bank (SARB) cut repo rates significantly to stimulate the economy, leading to a brief surge in market activity.
However, since November 2021, the SARB’s Monetary Policy Committee (MPC) has raised interest rates by a total of 475 basis points, with the repo rate now at 8.25% and the prime lending rate at 11.75%. The MPC has indicated that rates will remain high until inflation stabilizes at its target midpoint of 4.5%.
Jawitz notes that these high interest rates, coupled with low economic growth and reduced disposable incomes, have negatively affected property price growth. Many homeowners are struggling to sell their properties for their original purchase price, resulting in a real decline in property value, which threatens both economic growth and retirement planning.
Low consumer and business confidence also play a significant role, as long-term investments like property are heavily influenced by market sentiment. Despite these challenges, Jawitz remains hopeful. He highlights improvements such as better electricity supply from Eskom, a new coalition government, and the potential for interest rate cuts later this year as positive signs.
Additionally, Jawitz is optimistic about the new two-pot retirement system, set to start in September. This system could increase household disposable incomes by up to R79 billion in the fourth quarter of 2024. Jawitz believes that some of this money could be used to pay down debt or invest in property, providing a boost to the residential property market.
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