SA Property Market Could Recover After Cut

Home buyers and owners in South Africa are in for some good news should the Monetary Policy Committee decide to cut the repo rate by a full 100 basis points in February. This would mean a drop of nearly R1000 per month in bond repayments for each R1 million of bonds held.

The repo rate is the rate at which the Reserve Bank lends money to commercial banks. It peaked at 12% in August before finally being cut by 50 basis points in December. At the moment it stands at 11.5%, with prime at 15%.

According to Brain Falconer, MD of Colliers International’s residential division, the near halving of the petrol price and the sharp drop in inflation have given the bank all the reason it needs to make meaningful interest rate cuts. He added that this would be the “best possible move for the local economy”.

“A cut would also slow down the destructive cycle of bank repossessions and encourage more people to enter the property market.”

This would significantly help the 5% of homeowners in a negative equity position recorded at the end of last year, and around 130 000 homeowners in trouble with their bonds.

Information in the article is courtesy of Daily Dispatch Online (Cut of 100 points would revive housing market – 22 January 2009)

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