Homes remain affordable despite pinching rate hikes

Seeff Property Group Chairman Samuel Seeff comments on the affordability of homes despite pinching rate hikes.

According to Seeff Property Group Chairman Samuel Seeff, the South African Reserve Bank’s (SARBS) decision to hike the repo rate by 25 basis points for the third time came as no surprise; this factored into the general outlook for the housing market.

While we hoped for a reprieve from the bank to provide much-needed respite for buyers and homeowners facing high costs, the market is aware that the regular rate hikes are necessary for inflation and normalising the rates after significant cuts in 2020.

There is still significant activity even as one of the most extensive summer sales seasons comes to an end; however, though the market adjusts to the regular rate hikes, buyers and homeowners begin to feel the financial pinch and must react accordingly.

Based on a twenty-year housing bond at the base rate and due to the recent rate hikes, buyers and homeowners must budget for additional bond amounts as displayed below.

Bond Amount

R750,000 – extra R115 (repayment increases from R6,042 to R6,157)

R900,000 – extra R139 (repayment increases from R7,250 to R7,389)

R1,000,000 – extra R153 (repayment increases from R8,056 to R8,209)

R1,500,000 – extra R230 (repayment increases from R12,084 to R12,314)

R2,000,000 – extra R307 (repayment increases from R16,112 to R16,419)

R2,500,000 – extra R384 (repayment increases from R20,140 to R20,524)

Overview of the Current Housing Market

Seeff affirms that the interest remains far below the original 10% recorded in early 2020 before the COVID-19 pandemic; before, the interest rate sat at 7.75%. Furthermore, Seeff states that it is still cheaper to purchase a property rather than renting one, and doing so will provide you with a valuable asset and the security it affords. The volumes have levelled out since their considerable heights during 2021, indicating that they met most of the demand.

Samuel Seeff does not anticipate any significant impact on the housing market and firmly believes that despite stock shortages in certain places, the prognosis remains positive, with the market still trading well above pre-pandemic levels. 

According to the popular mortgage calculator OOBA, 100% bonds (with varying costs) are still available to first-time buyers. The interest rate is also an incentive for those who can locate favourable bank loan conditions.

Seeff believes that asking prices remain under pressure despite the favourable conditions, particularly in the upper price ranges. First National Bank (FNB) also confirms that house price appreciation has dwindled to around 3.8% (from 4.1% from last year). Furthermore, the rental market has stabilised due to increased rental growth, a marginal improvement from figures measured in 2020 from July to September through to July 2021.

Seeff also welcomes the relaxation of the pandemic restrictions and views it as a step towards reopening the economy but advises that consumers remain vigilant against possible risks, including the frequent price hikes and potential fallout from Russia-Ukraine War.

While houses remain affordable in these advantageous conditions, it is the ideal time to purchase property despite the pinching price hikes.