Rates up: Experts say what this means for the property market

Nov 23, 2018 | Features, Local Property

Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, Rudi Botha, BetterBond CEO and Stuart Manning, CEO for the Seeff Property Group.

“All economies and property markets go through cycles of ups and downs and many will tell you if only they had bought at a particular time.”

Despite hopes that the interest rate would be kept the same ahead of the festive season, the increase of 25 pts (increasing the base home loan rate to 10.25% from 10%), means home-owners and buyers will have continue tightening their belts.

Although not unexpected, the announcement of increase by the Monetary Policy Committee (MPC) of the South African Reserve Bank came as a disappointment so close to the festive season. A reprieve would have given customers a much-needed financial break after all the increases they had to absorb this year. Now home-owners will now have to budget for higher instalments on their home loans and other debts.

“It is disappointing, but not unexpected that the MPC has chosen to increase rates at this meeting. The challenge now falls onto consumers who are already pinched by rising fuel costs, a weakening economy, and a month of increased expenses to keep up with the payments on their home loans and not fall behind on any other credit repayments,” says regional director and CEO of RE/MAX of Southern Africa, Adrian Goslett.

For home-owners with bonds, the interest rate increases announced by the Reserve Bank today will add at least R16,60 per R100 000 borrowed to their monthly repayment, according to bond originator BetterBond.

“So, on a 20-year loan of R1m, for example, the monthly instalment will rise by at least R166 and possibly more, depending on the current interest rate that the borrower is paying,” says BetterBond CEO Rudi Botha.

He explains that the interest rate decision, which will see the repo rate rise to 6,75% and the prime rate rise to 10,25%, will also mean higher monthly repayments on every other form of debt, including car finance, credit cards, store accounts and personal loans.

With many financial experts expecting that interest rates will continue to rise in the new year, Botha advises home-owners to put any bonus they do receive in December into their bond and so reduce the capital portion of their home loan.

Still a buyer’s market

Conditions remain favourable for property buyers who can find good value given the flat price growth and rising stock levels, but they shouldn’t wait too long says Stuart Manning, CEO for the Seeff Property Group.

“All economies and property markets go through cycles of ups and downs and many will tell you if only they had bought at a particular time. While price growth has flattened, there has been no price devaluation yet and it is still safe to invest in property,” he concludes.

Herschell Jawitz, CEO of Jawitz Properties, confirms that the current property market offers good value to buyers, the best since the market crash in 2009 he says.

Also agreeing that would be buyers shouldn’t wait, is Goslett who says interest rate hikes are unavoidable over the course of a twenty to thirty-year loan term. Much like annual rent increases, interest rate hikes are simply part of the risk of owning property, he says.

Continuing the positive side, Dr Andrew Golding, chief executive of the Pam Golding Property group, says they continue to see pockets of robust and also renewed activity in the housing market. They are seeing an uptick in sales in

sales in areas of Cape Town such as the Atlantic Seaboard, Southern Suburbs, Blouberg and Durbanville; Gauteng’s Hyde Park, Fourways and Pretoria; and in KwaZulu-Natal the region north of Durban, while areas of the Eastern Cape such as East London and Port Elizabeth are also more than holding their own, he says.

There is a notable trend with sales in areas offering accessibly priced homes. They are also seeing more younger home buyers of around 35 years which indicates increased buying power and growth in the younger population of upwardly mobile consumers.

Energy-saving features to reduce municipal tariffs as well as contingency plans for water-shortages are expected to become even more sought-after.

“The case for home ownership and investment remains as compelling as ever, particularly in the current buyers’ market, as people need a place to call home, whether as an investment or primary residence,” ends Golding.

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Property experts welcome unchanged repo rate

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