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A repo reprieve, at least for now

A repo reprieve, at least for now

MAIN IMAGE: Dr Andrew Golding, chief executive of the Pam Golding Property group, Leonard Kondowe, Finance Manager for Rawson Property Finance, Adrian Goslett, CEO of RE/MAX Southern Africa, Samuel Seeff, chairman of the Seeff Property Group, Tyson Properties CEO Nick Pearson, Rhys Dyer, CEO of ooba Home Loans, and Bradd Bendall, head of sales of Betterbond

Staff writer

Last Thursday, the Monetary Policy Committee’s (MPC) announcement that interest rates will remain stable at 8.25% (repo rate), leaving the prime lending rate at 11.75%, was a relief to cash-strapped South Africans. This comes as some relief as many debtholders struggle to keep up with repayments, even at the current rates.

A slight boost for buyers, especially first-time buyers

“This is certainly good news for interest-rate-sensitive first-time buyers, whose applications (according to ooba) continued to decline in October (2023) to 47.3% of ooba’s total mortgage applications. This is compared with the early stages of the pandemic when the Reserve Bank cut interest rates aggressively, applications from first-time home buyers in May 2020 peaked at 56.2% of all applications received – at a time when the prime rate was 7.25%”, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

Leonard Kondowe, Finance Manager for Rawson Property Finance, shares, “The distressed property market is busier than ever, but the lack of affordability means the pool of qualified buyers is also very small. Anything that erodes affordability – whether that’s fuel price hikes, cost of living expenses or interest rates – is going to chip away at that pool even more.”

Silver linings, however, include the fact that lenders are increasingly hungry to secure qualified bond applicants, leading to a very competitive lending market. “Lenders are bringing their A-game when it comes to winning over bond applicants,” says Kondowe. “That’s not to say they’re being lenient on qualifying conditions – those are still as strict as ever – but for applicants with a strong financial history and good affordability, there are some very favourable finance opportunities out there.”

Distressed sales on the increase

“According to our distressed property sales division, compared to the same period in 2022 to year-to-date November 2023, there has already been a 40% increase in the number of mandates received from the banks’ distressed property programs. Moreover, there has also been a 160% increase in the number of clients our agents have referred to their banks for assistance signing up for their distressed programs,” says Adrian Goslett, CEO of RE/MAX Southern Africa.

Specific areas remain resilient

Samuel Seeff, chairman of the Seeff Property Group, says that while the market has contracted, it has remained resilient and, in many areas, is still ahead of the 2019 pre-Covid figures as buyers have sought to take advantage of the favourable buying conditions.

The Cape, for example, has seen another excellent year, with the upper end of the market still producing sales upwards of R20 million to over R100 million this year. Regardless of the challenges, people have continued to buy and sell property, and it was a good year, all things considered.

Tyson Properties CEO Nick Pearson believes that “Although interest rates have played a big part in the market over the last year-and-a-half with some areas dropping by as much as 46%, we are finding that properties located in areas that offer a good lifestyle, affordability, security, convenience and good schooling are still selling well,” he said.

Tyson said Tyson Properties was seeing growth in all three of its primary markets – Cape Town, Gauteng, KwaZulu-Natal, and the Eastern Cape. Hot spots, which included Cape Town and Western Cape Towns such as Somerset West and Paarl and the KZN coastal town of Ballito, had also seen spikes in interest, as had small towns in the Midlands where people were buying to achieve a different way of life.

A more optimistic outlook in 2024

Rhys Dyer, CEO of ooba Home Loans says there are clear signs that we may have reached the top of the rate hike cycle. “We still anticipate an interest rate reduction mid-2024.”

He adds, “While a rate hold is welcomed, urgent intervention is needed to restimulate homebuying activity in a contracting market environment.”

Bradd Bendall, head of sales of Betterbond, said, “After a year of inflationary pressures and interest rate hikes, we welcome the decision to hold the repo rate steady amid global economic headwinds. We are already seeing encouraging signs of positive shifts, with increased quarter-on-quarter house price inflation in sought-after provinces and home-buying activity across all age groups. With consumer price inflation now comfortably within the Reserve Bank’s targets and an improvement in the employment rate, we’re optimistic that the end of the current rate-hiking cycle is in sight, and we can look forward to lower interest rates in 2024.”

Dr Golding shares, “Generally speaking, the outlook for 2024 is likely to show a noticeable improvement in several key residential property metrics compared to 2023. Dominating this improvement in outlook will hopefully be the start of a downward trend in interest rates, which nearly always signals an uptick in activity and which, as a consequence, is also likely to herald the start of a cycle of real house price growth. In recent months, growth in house prices nationally has stabilised at 3.3%”.

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