It was also an incentive for first-time homebuyers to step on to the market. However, real estate agency experts were quick to add that until the industry is fully operational again, buying would remain stifled as consumers would have to buy property without seeing it.
This recent reduction marks the fourth drop in the prime interest rate this year - and brings the repo rate to 3.75% and leaves the prime lending rate at 7.25%.
In practical terms from June 1, the minimum monthly instalment on an R1m bond will be about R1747 lower than it was in January, according to the Property Hotline.
It could also tip forever-renters into becoming homeowners with rates at 50-year lows, and the possibility emerging that it may become cheaper to buy than to rent, says Carl Coetzee, BetterBond CEO.
David Sedgwick of Horizon Capital Residential agrees it provides stimulus to the market and results in increased affordability and improved consumer confidence.
However, while welcoming the move, regional director and CEO of Re/Max of Southern Africa, believes those that do have the means to buy, will need to be willing to purchase without viewing a property which they will only be able to do if current lockdown restrictions are amended. He believes thus that "interest rate cuts will do little more than help existing homeowners keep up with their bond repayments”.
Samuel Seeff, chairman of the Seeff Property Group, also welcomed the move but said while there is interest from buyers, “the longer the lockdown lasts, the more the challenges are piling up for the economy and property market”.
“While many support structures of the market such as the deeds offices, conveyancers and the banks are becoming operational, buyers are extremely frustrated with the Level 4 restrictions. They cannot comprehend the logic of not being able to view a property and so that they can move forward with their property transactions,” he says.
Mike Greeff, chief executive of Greeff Christie’s International Real Estate says industries and consumers are under a great deal of financial pressure, and so the rate cut is a welcomed relief for all, but "it is hardly shocking given the mounting toll Covid-19 is having on South Africa’s economy".
"The economy has all but shut down due to the nationwide lockdown. The decision to cut the repo rate is a clear indication of the seriousness of the virus and its effects on the economy.”
Herschel Jawitz, CEO of Jawitz Properties describes the rate cut as "bitter sweet" in the face of a developing economic crisis as a result of the national lockdown, which still remains at Alert Level 4.
He adds tthe latest rate cut does create a dilemma in terms of the buy versus rent debate especially for first time buyers who are looking to get into the market. With current repayments at prime on a R1m mortgage at R7,904 per month, repayments are much the same as you would be paying to rent a one-bedroom apartment and may even be less depending on area.
For buyers who were looking to buy prior to lockdown and who feel that their jobs and earnings are safe, this may be the best buying opportunity in twenty years when property prices plummeted as interest rates peaked at 22% in 1998.
How the rate cut impacts on the market, however, is almost impossible to predict as the residential real estate industry remains under lockdown for now.
With inflation still at the lower end of the 3% to 6% target band, Andrew Golding, chief executive of the Pam Golding Property Group, says it is hoped that the current low-interest rates will help bolster the economy and provide prospective home buyers and investors with an incentive to make property buying decisions. These include first-time buyers.
“Further motivation for savvy homebuyers who have medium- to long-term capital growth in mind, is the current muted house price inflation,” he says
FNB's chief executive, Jacques Celliers says the rate cut is another indication of the SARB’s commitment to protect the country’s economy and help credit active customers to reduce debt servicing costs.