The South African Reserve Bank (Sarb) announcement to cut its repo rate by another 50 basis points to 3.75% on Thursday, taking the prime lending rate to 7.25%, makes it far more affordable for buyers to invest in real estate during these uncertain times. The bank’s repo rate cuts this year totals 275 basis points or 2.75%, as it slashes rates during Covid-19 economic pressures.
Certain aspects of the real estate market will begin to pick up now as rates have been cut for the fourth time and the Deeds Office approaches operating at a greater capacity.
There is no doubt our economy faces a serious decline in the near future and that the GDP contracting beyond initial forecasts paints a rather grim picture, however, it must be noted that real estate offers a long term solution to financial uncertainty. Even in times of bleak economic outcomes, the real estate market shows long term positive returns, precisely because of its ability to overcome short term difficulties.
First-time buyers have a unique opportunity to get their foot into the proverbial real estate door with the lending rate cut to a 50-year low. This will bolster the economy with a much-needed increase in consumer confidence.
South African Reserve Bank Governor, Lesetja Kganyago, explained that the easing of the lockdown will support growth in the near term and some high-frequency activity indicators show a pickup in spending from extremely low levels. However, getting back to pre-pandemic activity levels will take time. GDP is expected to grow by 3.8% in 2021 and by 2.9% in 2022. This shows that over the next two years the economy will return to pre-lockdown conditions, a relatively short time in the life of a real estate investment.
We're hoping buyers take hold of this opportunity and invest in their financial security fo the long term.
Statement by
Richard Gray
CEO Harcourts South Africa