O-YES Properties | This is how much you will save on your bond after another 1% rate cut in less than a month

This is how much you will save on your bond after another 1% rate cut in less than a month

 

The decision by the Reserve Bank to cut the repo rate by a further 100 basis points to 4.25%, bringing the bond rate to 7.75%, is seen as absolutely necessary for the economy and property market - providing a significant 20% saving and boost for demand.

The announcement made via twitter on 14 April, is the second major cut in less than a month after the Reserve Bank cut the rate by one percentage point on 17 March.

The surprise rate cut comes after the Monetary Policy Committee moved its May 2020 meeting earlier to today. This rate cut takes the interest rate to a new historic low.

Here's what you can expect to save and pay per month on the following bond values.

Together with the previous cut, this is vital for when the country comes out of the Covid-19 Lockdown and the recovery starts. The two rate cuts provide a saving of about 20% for property buyers and are a significant boost for demand.

The property market will emerge from the Lockdown with a level of pent-up demand, but still mainly in the primary residential market to around R1.5m (up to R3m in some areas).

Above that price level, especially where buyers are not so reliant on mortgage finance, the activity will remain muted.

Growing expectation 20/21 budget to be revised drastically

A large-scale infrastructural investment programme initiated to revive the economy is needed as South Africa faces the economic impact of the COVID-19 pandemic and lockdown.

This should be designed to keep many businesses afloat and to prevent the already high official unemployment rate, rising almost overnight by an anticipated 50%.

The figures and trends previously used as guidelines no longer apply: a total rethink is now recognised as essential, and the government seems to recognise the urgency with which this is required.

South Africa’s GDP, we are told, will decline by up to 7% if drastic measures are not taken now. The government will have to increase its very high borrowings to save us from a countrywide meltdown. This will not be easy as SARS is already over R60 billion short of its anticipated tax income for this year and our borrowings are already excessive - but there is clearly no alternative.

The sum to be injected into job creation initiatives over the next two to three years is reported to be in excess of R3 trillion.

It has been shown worldwide, that one of the great advantages of such infrastructural boost programmes is that property and the construction sector are always among the main beneficiaries of such input. This widely expected boost from the State will very definitely assist property, particularly residential property, to ride out the many negative factors we will face in the next year or more.

Courtesy of Property24 - Samuel Seef (Seeff Property Group) & Rowan Alexander (Alexander Swart Property Group)
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