This week''s 100 points repo cut is a start, but more is needed to save the ailing property industry, say the experts who have called on the SA Reserve Bank, business, government and individuals to work together to limit the damage caused by the lockdown.
“It’s a collective effort,” says Grant Smee, managing director of Only Realty and founder of EPiC South Africa. While the reduction will provide some relief to homeowners, it will need to be combined with payment holidays and limited salary reductions (or job losses) over this critical period, he says.
The repo rate drop will result in lower repayments on debts, including mortgages but, in effect, the saving on a 20-year bond is only around R63 per month, per R100 000 of debt.
“Some relief on our road to recovery is welcomed and I firmly believe this decision by the SARB was not taken lightly. However, on its own, this measure is not nearly enough to significantly mitigate the implications the lockdown is going to have on the property market and the broader economy,” says Smee.
“For investors, combining the reduction with repayment holidays offered by financial institutions, as well as the hope landlords and tenants can come to a compromise in terms of rent to limit losses, will compound the positive effect the rate reduction is attempting to make.”
The cut takes the prime lending rate down to 7.75%, which Carl Coetzee, chief executive of BetterBond describes as welcome news for the property sector. Echoing Smee, he says while the drop in the repo rate is a good start, additional strategies must be put in place to secure the industry’s long-term survival.
“One measure could be to suspend transfer duty on property valued to a certain amount. Raising the transfer duty threshold, currently at R1 million, to R3m for a limited period, say six months, with an option of reviewing after six months, could mitigate the risk of the industry contracting significantly as we start what is sure to be a slow economic recovery.”
With the push for another interest rate cut later in the year, Charles Thompson, director of Devmco Group, believes there will be a spike in property acquisition and is bullish about the local property market.
This week’s 100 point repo cut reduced the rate to 4.25%, its lowest in almost 50 years, offering those looking to buy property a great opportunity.
“Right now, there is no safer investment option than property; stocks are too volatile and the global economy is not helping the stock markets either.
“In KZN, we know seaside homes hold their value but one cannot overlook things such as security; service infrastructure; roads and facilities and the value of a blended lifestyle or livework-play lifestyle. To buyers these are now non-negotiable.”
Thompson believes people who were looking to move money offshore are rethinking and will be looking for investment vehicles within South Africa. He believes the stock market is losing appeal because many people “don’t have the appetite for risk that comes with investing in the stock market, especially older folks of retirement age.”
However, property has proved to be a stable asset in recent times. “At the moment, banks are offering some loan and credit amnesty to people, and there looks to be another interest rate drop on the cards following this week’s, so conditions are good for lending and getting a home loan. “There has been a lot of activity in what is deemed the affordable market, that is properties valued up to R3m.”