The Monetary Policy Committee (MPC) took a cautious decision by announcing today that interest rates will remain unchanged until their next meeting in November. The prime lending rate therefore remains at 10% and the repo rate at 6.5%.
“Our economy is already showing signs of recovery, reflecting a 3.1% growth in our GDP for the second quarter of 2019. With inflation dropping to 4% in July, the MPC could have seized this opportunity to further stimulate our economy by announcing a cut in interest rates at this time. Instead, the MPC has erred on the side of caution by choosing to keep interest rates stable,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
Goslett goes on to say that this announcement is a disappointing one for the housing market. “A further interest rate cut would have increased market activity and driven up prices – which is exactly what the property market needs at this time to rectify the real house price decline that we have experienced since last year,” Goslett explains.
As a takeaway from this, Goslett recommends that, despite the unchanged interest rate, there is no better time to enter the real estate market than right now. “The property market works in cycles. Currently, we are experiencing negative house price growth in real terms. But, in the long term, market conditions will improve to yield positive house price growth again. Buyers who purchase property now are therefore likely to see much higher returns in the long run. Consequently, I encourage South Africans to make the most of the sturdy interest rate by entering the market while real house price growth is still slow,” Goslett concludes.
