Homenet MD Martin Schultheiss says: "This decrease in the repo rate, which will hopefully rapidly lead to similar declines in the banks' home loan rates, will mark the beginning of a turnaround in the property market. It will help to re-instate consumer and investor confidence in property, and stimulate renewed buying activity by increasing affordability. This will, in turn, cause values to start shifting upwards again relatively soon, further proving the worth of property as in investment in which the fluctuations or cycles are not extreme.

"On the other hand the rate decrease should make buyers aware that, despite the fact that further interest rate cuts are expected later in the year, they have a narrowing window of opportunity to get into the market before prices start to rise again."

RealNet CEO Tjaart van der Walt says that the rate decrease will not have a big impact on the economy but does "give direction" and will contribute to consumers being more positive about the future.

"It will not solve the property market problem because it will not alleviate the banks' lack of funds for home loan lending, the bad home loan 'books' or the new requirements regarding deposits.

"However it would seem to indicate that we are now reaching the bottom of the market and can expect it to start levelling out soon and rising again in due course. It will also give the battered real estate industry something positive to build on."

Other big positives at the moment, he says, are the sharply declining inflation rate, lower fuel and food prices and massive capital expenditure in infrastructure, "not to mention the natural resilience of most South Africans when it comes to dealing with change".

Rate cut sets property pace

The interest rate cut supports views that the property market has turned a corner, says Young Carr, CEO of Aida National Franchises.

"The cut is indeed good news for the sector and we expect it to set the pace for the rest of the year, with further cuts to follow.

"Feed-back from our estate agencies throughout the country already indicates that the property market is lifting its head after the turmoil of the past few months. Figures show that attendance at show houses are dramatically up - the average of seven visits per show day last year has jumped to between 30 and 40 visits for properties on sole mandate in the bigger centres so far this year.

"Economic indicators in general are more upbeat, and we expect that the latest cut will be followed by at least 100 percentage points in April.

"What this means for consumers is that they now have a golden opportunity, whether they are buying or selling. Buyers who buy now at depressed prices can look forward to lower bond repayments, while sellers can realistically expect that more affordable financing will start underpinning property prices," Carr says.

The 100 basis points decrease in the benchmark repo rate of the Reserve Bank announced today was expected but is still disappointing says Gerhard Kotzé, CEO of the ERA South Africa property group,.

In a critical reaction to the announcement by the Reserve Bank's Monetary Policy Committee (MPC), Kotzé says the property market needs at least a three or four percent decrease in interest rates to ensure a kick start.

"The adjustment announced today, although welcome as such, is out of step with international trends which have led to historically low interest rates as part of a series of global stimulus packages in the wake of the credit crisis.

"South Africa has been less affected than many other countries by the credit crunch and there is no justification for maintaining our interest rates at such high levels.

"Our inflation rate has slowed to 9,5% from last year's average of 11,5%, economic growth is barely maintaining positive territory on a national basis and consumer spending, along with money supply, has declined significantly.

"Meanwhile thousands of potential home owners are being forced to rent and significant demand for property is building up, possibly setting the scene for explosive growth in home building and demand followed by a renewed bout of inflationary pressures in the property market.

"Nobody is suggesting a reckless abandonment of conservative fiscal and monetary policies. But there is a very real danger of overkill of the property market, unless there is a further softening of the stance on interest rates.

"The property sector, along with the related construction, manufacturing and household consumer goods sectors, is estimated to contribute about 7% to 8% of GDP and clearly it's justifiable that this important market receives some mild stimulation at this stage of the business cycle.

"In addition it is equally important that banks, as sources of bond finance, should take a more lenient approach towards approval of loans for home buyers.

"There has arguably been an over-reaction from the banks to current economic conditions and to the restrictions of the National Credit Act. Consequently home loan advances have dropped significantly and on average only one in four bond applications is being approved.

"In turn, the banks take their lead from the Reserve Bank in respect of lending policies and in this respect as well, the Monetary Policy Committee has a responsibility to signal a more accommodating attitude towards credit for home ownership by lowering the benchmark repo rate more aggressively."