Repo cut a positive move in a stagnant economy

PUBLISHED 28 JAN 2020   

The Reserve Bank’s decision to cut the prime lending rate by 0.25% has sent waves of excitement through the property sector. 

After years of unchanging rates and a stagnant economy, the recent cut may be just what the Cape realty market needs. Here’s what this positive development could mean for buyers and sellers alike. 

Lower rates, easier sales

With prices down off their all-time highs of several years ago, the Cape Town residential property market has been on the verge of turning for a long time. Unfortunately, a slow economy has caused many potential buyers to think twice before signing an offer to purchase. 

For many of them, affordability was the issue - and that often comes down to the cost of bond payments. The interest rate cut should translate into real savings for everyone who has a bond to pay each month. 

For example, a R1 million bond at 10% interest may end up being R200 cheaper each month. 

This could help existing homeowners to pay their bonds on time and not be forced to sell their properties in a hurry. That should keep rush sales out of the market while giving serious buyers the freedom to qualify for bonds with affordable monthly payments. 

With any luck, we may start to see an uptick in the number of people selling their homes and upgrading to bigger or more valuable properties - but don’t expect a dramatic property boom just yet. 

Waiting for the economy 

A small interest rate cut - even if it were repeated several times in 2020 - may not be sufficient to create a serious boom in residential property. 

Many would-be home buyers are concerned about the state of SA’s economy and are putting off big financial decisions like property purchases until they feel more secure about the country’s long term prospects. 

Once our economy returns to growth, however, we may see a big jump in property prices. That makes the present moment one of the best times to buy property if you have a long term outlook. 

Buying for the future 

If you’d like to invest in a Cape Town home while the market is still full of good deals, now is the time. 
Contact the Cape Realty team and we’ll take you through our comprehensive portfolio. 

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