“The interest rate is too high. It is stymieing economic growth and driving unemployment and higher debt levels; it is now enough.”
This is according to Samuel Seeff, chairman of the Seeff Property Group, who is urging the South African Reserve Bank (Sarb) to consider holding off this week and keeping the repo rate unchanged at 8,25%.
This will keep the interest rate stable at 11,75%.
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While Reserve Bank Governor Lesetja Kganyago has signalled that a further 0,25% hike may be necessary to curb inflation, Seeff says the burden on consumers, homeowners, and buyers is “simply too high”. On top of electricity and other hikes, they have already had to absorb 4,75% in rate hikes since 2021 and are being “punished” when current inflation is not due to domestic spending, but largely imported.
In any event, he says inflation has been coming down, and hit an unexpected 13-month low of 6.3% in May 2023. The Rand-Dollar rate also appears to have stabilised.
In reality, the higher interest rates have done more harm than good, and have exacerbated the weak economy which needs a kick-start.
“The Sarb should now start looking at bringing the rate down,” Seeff says, citing the fact that economists, such as Professor Chris Malikane from Wits, also recently spoke against another rate hike, stating that South Africa’s important economic block, the middle class, is facing too much pressure.
The property market reflects the interest rate hikes and is therefore seeing decreased sales volumes.
“Even the Cape market, which has been strong, is seeing a decline in sales volumes as fewer buyers are now active. The burden is now simply too high for consumers and home buyers.”
Other property experts agree, saying that homeowners are already buckling under financial pressure. This will be worsened if the interest rate is hiked by the expected 0,25% or 0,5% on Thursday. Such hikes will take the prime lending rate to 12% or 12,25% respectively.
If the rate is hiked, Richard Gray, chief executive of Harcourts South Africa, says it would be very unfortunate.
“The consumer really can’t handle too many more economic shocks. They are already struggling with high electricity prices, high inflation, large municipal rates increases and already-high interest rates...
“Homeowners will struggle to make mortgage payments and we will see a higher number of defaults. Landlords will have to increase rental amounts to cover their additional financing costs, which will in turn place pressure on their tenants.”
Yael Geffen, chief executive of Lew Geffen Sotheby’s International Realty, says there is a limit to the amount of belt-tightening society can bear, and she believes we’re close to reaching it.
“Poverty levels are rising and skilled individuals are leaving in droves. We simply can’t afford to lose any more.”