Property experts: A repo rate cut could have helped the stagnant economy

Chief Executive at Pam Golding Properties, Andrew Golding, said the Monetary Policy Committee (MPC) of the South African Reserve Bank had missed an opportunity to help build the economy on Thursday.

Golding’s comments come in the wake of the announcement by he South African Reserve Bank that the repurchase rate would remain unchanged at 7 percent. The MPC had decided that the current economic climate did not warrant a repo rate reduction.

However, Golding is not sold on that, although the MPC decision was to be expected. In the context of property, a reduction in the rate could possibly have provided incentive for first time buyers to get onto the ladder.

“While we await the ratings announcement from Moody’s, the third major global ratings agency, and against the backdrop of volatile socio-political factors and slower national house price inflation, the residential property market overall, remains strongly resilient,” said Golding.

“For home buyers and those who follow trends in the residential property market the most common focal point is whether sales and values go up or down. Over the past few years the market has remained remarkably robust, given the poor performance of the economy and nationwide unrest over lack of service delivery and lack of jobs.

“Throughout 2016 inflation was above the government’s upper target figure of 6 percent. While this exceeded the national house price inflation rate, certain sectors and regions continued to outperform inflation,” added Golding.

Sandra Gordon, a senior research analyst at Pam Golding Properties supported the argument for a cut, even if that happens later in the year.

“Encouragingly renewed Rand strength, combined with declining of food price pressures, has seen the inflation rate easing back into the Reserve Bank’s inflation target at 5.3 percent in April 2017. The longer the Rand’s current strength persists, the better the outlook for local inflation and, ultimately, the prospects for an interest rate cut later this year.”

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