Unchanging Repo Rate Could Boost South African Property Market

The announcement by Reserve Bank Governor, Gill Marcus, to keep the repo rate – the price at which the Reserve Bank lends cash to commercial banks – unchanged at 5.5 %, has been welcomed by a rather bruised and battered real estate market. “There’s been so much uncertainty in the market and that has led to a lot of negativity and indecision, and the fact that the repo rate is remaining the same, is really good news – Marcus is sending a message of stability to would-be investors who will take comfort in the fact that they can make more accurate forecasts and budget for the months ahead,” says Mike Greeff, CEO of Greeff Properties, an affiliate of Christie’s International Real Estate. “The stability of the repo rate is going to act as something of a life raft in a sea of economic uncertainty ­– it’s the one thing bond holders can cling to in the face of shocks like the future Eskom rates rises and the less than favourable inflation rate,” adds Greeff. 

The rigorous requirements set down by the National Credit Act means that the average buyer may not see the benefit of the repo rate stability, but there are likely to be positive spin offs in the wider midrange  market from R1 million to R2.5 million, where Greeff maintains that knowledge of stability will lead to more decisiveness. “We anticipate that the extra bit of economic confidence is what many would-be investors who may previously have been fence sitting, need to take the plunge and decide to purchase."

“The repo rate announcement also sends a message of stability to overseas investors and we are likely to see a flurry of interest particularly from those looking to purchase in the top end of the property market,” says Greeff, citing the weaker rand as a prime incentive. “South Africa’s legislation regarding foreign ownership of real estate is among the most lenient in the world,” says Greeff. He explains that funds introduced from outside South Africa to acquire fixed property within South Africa may be repatriated together with any profit on resale of the property, provided the Title Deed of the property has been endorsed “non-resident.”  Foreigners are also able to raise finance in South Africa, and can be granted a maximum bond of 50% of the purchase price, as per rules and regulations of the South African Reserve Bank.