The South African Reserve Bank’s (SARB) recent decision to hike the repo rates by 50 basis points put it at 4.75% (and the prime rate at 8.25%), which will increase the cost of home loan finance.
According to Seeff Property Group Chairman Samuel Seeff, now is the ideal time to buy, and despite this increase, there is little cause for concern, as the rate remains far below the pre-pandemic levels. Seeff further states that the annual market lookout factored in these recent rate hikes and should not dissuade prospective buyers from purchasing available properties on the market.
The market is currently facing a hiking cycle, and the SARB is making an effort to normalise the rate, so in light of this, you can expect a further 100bps throughout the year.
Other challenges for the economy and overall GDP growth include the electricity crisis, food and fuel price hikes and the CPI, which remains at the upper target range in contrast to the rand, which faces significant pressure. The Russia-Ukraine war is also causing untold fall-out and directly causing supply constraints.
Seeff says that despite these economic challenges, the residential market continues to thrive, with buyers showing strong interest. Seeff does, however, caution homeowners and buyers who will need to adjust to higher home loan repayments; however, beyond the further 100bps, they expect no other impact on the interest rate.
Seeff urges buyers and sellers to take advantage of the favourable conditions brought about by the low-interest rate and generous bank lending supported by the National Credit Act 2005, which provides strong market support.
Banks continue to compete, dropping deposit requirements to as little as 6% to 7%, with home loan finance becoming more accessible. According to Ooba, a popular mortgage originator, 60% of their approved mortgage bonds in the first quarter sat above the R1.5 million price band. Overall sales volumes normalised following the buyer frenzy caused by post-lockdown sales; however, the market continues to trade at pre-pandemic levels, with the residential market, in particular, experiencing positive buyer attention.
While residential buying is the primary contributor to the market’s success, there was a significant uptick in the secondary market, specifically on the luxury and coastal price bands for the Atlantic Seaboard. These prices topped the R100 million record for the first time in many years and attracted foreign and semigration buyers alongside local interest.
Pandemic-induced lifestyle changes, including semigration to the Cape and other areas, dominate the seller’s market, with many looking to downscale due to financial constraints and others selling to upgrade to a better property, with robust activity in the R3 million to R5 million price bands.
Samuel Seeff concludes by confirming that the current property market remains balanced with a sufficient stock supply to meet increasing buyer demands, with only a few exceptions in areas with high demand price bands.
House price growth slowed to a 4% average, slightly higher than the lower price bands. The market still holds excellent value, especially at the higher price bands; Seeff advises buyers to take advantage of these advantageous conditions but cautions sellers to price realistically to avoid losing out on this prime selling window of opportunity.
Due to the latest interest rate hike and based on a calculation for a housing bond at the base rate over two decades, homeowners and buyers will need to budget for extra costs as follows:
R750,000 bond – extra R233 (repayment incr. from R6,157 to R6,390)
R900,000 bond – extra R280 (repayment incr. from R7,389 to R7,669)
R1,000,000 bond – extra R312 (repayment incr. from R8,209 to R8,521)
R1,500,000 bond – extra R467 (repayment incr. from R12,314 to R12,781)
R2,000,000 bond – extra R622 (repayment incr. from R16,419 to R17,041)
R2,500,000 bond – extra R778 (repayment incr. from R20,524 to R21,302)
As the market continues to thrive and properties in South Africa retain good value for money, there is no better time to buy or sell, especially as we move into the winter season. We recommend reading our article on why winter is the perfect time to sell your property.