Appeal for “drastic interest rate drop”
At a time when virtually every country in the developed world has reduced its interest rates, South Africa is still adopting a conservative, reactionary attitude to rate cuts - and is paying a high price in stagnation for doing so, according to Mike Greeff, CEO of Greeff Properties in a company statement.
"It is no secret," said Greeff, "that unaffordable bond loans (and unsuccessful bond applications) are clobbering the residential housing sector. It seems that every time the rest of world has recently lowered or increased interest rates, South Africa has "missed the boat" by waiting too long to follow suit.”
"I believe we need to look at the current situation, admit that we are on the brink of or already in a recession and take a bold step forward by initiating a 2,5% drop in interest rates soon or at least before October 2009. Only so will we revive the property sector and the economy – and if this has inflationary effects, they will have to be lived with – but initially this is unlikely."
Greeff claims that it takes four to six months for an interest-rate change to make itself felt in the residential property market. "It does not bring about a sudden change. Rather, there is a slow turnaround. That has to be borne in mind if the government is serious about stimulating the economy through increased public spending."
Greeff pointed out that even though his company deals primarily in the more affluent sectors of the property market only one in two of his clients' bond approvals are now being accepted.
"We have strong evidence," he said, "that people are now simply unable to spend or invest, which means that the economy will continue to shrink. Let us make the courageous move of reducing rates now, at once. We will then have a good chance of seeing a limited recovery in the housing and other sectors this year followed by a more positive upturn in 2010."