MAIN IMAGE: Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, Carl Coetzee, CEO of BetterBond, Leonard Kondowe, Finance Manager for Rawson Finance, Rhys Dyer, CEO of ooba Home Loans, Samuel Seeff, chairman of Seeff Property Group, and Dr Andrew Golding, chief executive of the Pam Golding Property group
Editor
The industry breathed a sigh of relief last Thursday when the Reserve Bank’s Monetary Policy Committee elected to keep the repo rate unchanged at 8.25%, breaking the recent hiking cycle. While Reserve Bank Governor, Lesetja Kganyago, was careful to say this decision does not preclude another hike shortly, the current decision brings relief to cash-strapped South Africans. What does this mean for homeowners, sellers, buyers, and investors? Industry experts weigh in.
Homeowners stay the course
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa shares that “The fact that the MPC hasn’t raised interest rates at this meeting should afford debtholders more time to adjust to their higher repayment amounts. The one consolation for debtholders (such as homeowners with mortgages) is that once our inflation is fully under control, we should hopefully enter a period of greater stability. If you take a more historical view of the stats, as soon as inflation hits the MPC’s target range, interest rates become much more stable. Homeowners can take some solace in this because it indicates that, barring external factors, interest rate hikes are far less likely to occur within the near future.”
Carl Coetzee, CEO of BetterBond says that “Our advice to homeowners who have been able to maintain their monthly bond repayments, is to try and keep those repayments unchanged now because this means significant savings on interest, and shaving years off the term of your home loan. Homeowners who are struggling to afford their monthly repayments must talk to their banks immediately. The banks are not out to repossess your home – they are there to help you hang onto your biggest asset and regain financial equilibrium”.
“Bond repayments have risen faster on previous rate hikes which have been higher than anyone expected, and salaries haven’t come close to matching those changes,” says Leonard Kondowe, Finance Manager for Rawson Finance, “My best advice, under the circumstances, is to focus on reducing unnecessary spending, avoid taking on new debt, and follow a strict monthly budget.”
Where simple budgeting will not suffice, Kondowe recommends approaching home loan providers to discuss debt restructuring options. “Lenders are very open to compromises that will help protect their investments,” he says. “Don’t be shy to approach them and discuss options. At best, you’ll find a mutually beneficial solution. At worst, you’ll walk away with a better idea of what your next steps should be.”
Sellers, be smart about pricing
Rhys Dyer, CEO of ooba Home Loans believes that while the road back to a thriving property market may still take some time, it is most certainly needed. “Most recently, consumers’ willingness to spend dropped to a low of -25 points (Q2 ’23) as per the FNB/ BER Consumer Confidence Indicator. This was the second lowest reading on record since 1994 and well below the historical average of zero.”
In addition, FNB’s Estate Agency Survey Q2 2023 painted a clear picture of the pressure on the property market. The average time a property is on the market increased to 85 days – the longest it’s been since Q2 of 2020. Key reasons for selling come down to household finances (24.1%), life stage downscaling (21.1%), and, relocation (11.6%).
“There are buyers out there – we’re helping them get prequalified and approved for finance all the time,” says Kondowe, “but the market is competitive and sellers need to be smart about pricing and marketing their properties professionally.”
Buyers, get a deposit together
While the market is now challenging for sellers and first-time buyers the upside, says Samuel Seeff, chairman of Seeff Property Group, is that we are now undoubtedly in a buyer’s market. The effect is that sellers will now really have to focus on pricing accurately to attract buyers.
For buyers, this could be one of the best times to buy with prices trading relatively flat while the banks are still lending, albeit that buyers must now budget for the higher interest rate. Seeff says it feels like the period before the 1994 elections and the 2008 Global Financial Crisis. Those who had bought prior in 1993 or 2006/7 with the perceived risk at the time, subsequently benefited greatly from good capital growth which followed”.
Dr Andrew Golding, chief executive of the Pam Golding Property group believes that “Keeping the repo rate steady is particularly motivating for aspiring, first-time home buyers, whose appetite for home ownership remains consistent, while the banks continue to offer attractive pricing, with the first-time buyer mortgage approval rate ticking higher to 81.2% in June – according to ooba’s statistics.
Coupled with this, the demand for buy-to-let investment properties continues to surge, rising to +10.9% of all ooba mortgage applications in June (2023), which is a positive indicator for the housing and rental markets. Furthermore, ooba reports that the average weighted rate of concession below prime improved marginally in June, easing to -0.42%.
Investors make the most of the current market
From an investment perspective, statistics from the Pam Golding Residential Property Index reveal that smaller, two-bedroom, freehold house prices have rebounded by +4.6% in June, while smaller, two-bedroom, sectional title HPI continues to increase momentum by +3.4%. Meanwhile, larger, three-bedroom, freehold homes have seen HPI slow to 1.9%”.
Dyer concurs, stating that “What is good to see is the buy-to-let investment currently taking place – particularly in the Western Cape. Investors are capitalising on the market and realise that many people are now in search of rental properties.”
Kondowe ends off by saying that lenders are hungry for qualified bond applicants, competing against one another to secure new clients. That said, finance offers are not quite as favourable as they have been, with the majority of offers falling at or just below prime.
“As always, the stronger your financial profile and larger your deposit is, the better your offer is likely to be,” he says. “It is possible to secure a bond of 100% to 105%, but this is seldom the best financial decision. If it was me, I’d err on the side of affordability to future-proof my investment, making sure my monthly repayments were at least one or two percent below my maximum affordability.”
