Interest rates 'too high' | Property experts call for dramatic 50bps cut
The Reserve Bank's interest rate decision, set for Thursday, has sparked intense speculation, with experts divided on the likelihood of a rate cut.
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Chairperson of the Seeff Property Group, Samuel Seeff, has called on the South African Reserve Bank to take a "bold stance" and cut the interest rate by 50 basis points (bps) this week.
The Reserve Bank's interest rate decision, set for Thursday, has sparked intense speculation, with experts divided on the likelihood of a rate cut.
Seeff argued that inflation has dropped significantly, reaching 3.2% in January — well within the Reserve Bank’s target range of 3% to 6%.
"A big factor is that inflation has reduced dramatically to around 3.2% in January. This is notably down from the 6% average in 2023 and the 4.4% average for 2024, according to Stats SA," he said.
He also pointed to the decline in oil prices and the relative stability of the rand, even after the Trump administration expelled South Africa’s ambassador, Ebrahim Rasool, last week.
"A key factor is the decline in the oil price to around $70 per barrel — lower than last year and below expectations. This will either drive inflation down further or help keep it contained, adding more incentive for the Bank to implement a bold rate cut," Seeff said.
"Additionally, the rand has remained stable. After weakening slightly, it actually strengthened over the weekend following news of the Trump administration’s decision regarding SA’s ambassador."
He also emphasised that the current prime interest rate of 11% remains too high — 100bps above the pre-Covid-19 level in January 2020.
"The gap between inflation and the interest rate is still too wide. Lowering the interest rate would stimulate activity in the property market and, more importantly, serve as a crucial incentive to boost economic growth and job creation.
"The prime interest rate at 11% is still a full 100bps higher than the pre-Covid rate of 10% in January 2020, which was later reduced to 9.75% and eventually to 7%. By comparison, inflation is now down to 3.2%, whereas it was around 4.5% in January 2020."
Despite the 0.2% increase in inflation since December, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, remains hopeful of a possible further cut of around 0.25%.
“We are still below the midpoint target range for inflation, which makes this a good time to further stimulate the economy with another interest rate cut,” Goslett said.
He adds that the impact of the previous rounds of interest rate cuts is only starting to reflect in the property market now.
"A further cut would help keep the momentum going and bolster activity within the real estate sector," he Goslett added.
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