The Reserve Bank’s decision to pause interest rate cuts today did not come as a surprise for Chris Tyson, CEO of Tyson Properties.
This week, it emerged that the Consumer Price Index (CPI) decreased by 0,1% between July and August, with four of thirteen categories in the inflation basket (including food and non-alcoholic beverages which contribute to household spend) and household equipment and routine maintenance dipping. Economists remain hopeful that inflation will remain in the acceptable 3% to 6% band going forward.
However, this does not necessarily mean that households are finding it any easier to manage monthly expenses, he points out.
Sometimes statistics mask the daily grind and, despite indications of a slight uptick in retail activity, overall consumer demand remains low. Economic policy uncertainty, a vacillating rand and the beginning of the Madlanga Commission of Inquiry into alleged police corruption could feed ongoing uncertainty.
However, Tyson is a firm believer that South Africans are extremely resilient and, even if this pause is just the beginning of what many economists expect to be a prolonged halt in interest rate cuts, he says that property owners have every reason to be positive if they compare this September to September 2024.
The current cutting cycle has seen the South African Reserve Bank (SARB) MPC cut interest rates by a cumulative 125 basis points (1.25%) since September 2024.
Although acknowledging the relief that rate cuts offer to stressed households, Tyson continues to urge property owners to budget wisely and repay mortgages at an existing slightly higher level whenever possible in order to reduce the overall repayment period.
His advice to sellers to price properties wisely still stands. He also encourages investors to take advantage of the current buyers’ market to invest in income generating properties as the already thriving rental market is likely to continue its upward climb whilst economic uncertainty and low growth persist.
Overall, he recommends that homeowners continue to cultivate sound financial habits when managing their household budgets.
His tips to help South African homeowners remain economically resilient are:
- Try to keep your repayments on loans at current levels if you can. That will enable you to pay off your home loan faster and become less vulnerable to future rates hikes.
- Create or stick to a strict household budget that will enable you to control disposable income.
- Review your insurance. Remove listed items such as laptops and phones that you are no longer using and ensure that car insurance is adjusted according to the age and resale value of your vehicle.
- Maintain your home. Keep your property in good condition so you do not land up with bigger issues you need to pay to have repaired.
- Create a passive income stream by leasing a cottage or create an AirBnB by converting an unused space on your property.
