What buyers need to know about the interest rate hike in South Africa

Seeff comments on how South Africa's interest rate hike will impact buyers

Buyers will be pleased to hear that the South African Reserve Bank's recent decision to increase the repo rate by 50bps to 7.75% should not disrupt the property market too severely. Samuel Seeff, Chairman of the Seeff Property Group, remains positive about the market and assures buyers and sellers alike of stability.

Additionally, the property market was expecting this interest rate hike. The Eskom energy crisis, weak business confidence, and the depreciating CPI inflation rate of 7% in February left the SARB with limited options and it was only a matter of time.

Today, homeowners looking to buy property must consider their options carefully. The good news is that there are still favourable lending conditions from banks, an increased transfer duty exemption threshold to R1.1 million, and a significantly higher approval rate than during the post-2007/8 NCA/GFC period.

These factors help to lessen the impact of the interest rate hike in South Africa and provide some hope for buyers looking to obtain a loan.

How Does the Interest Rate Hike in South Africa Affect Sales and Price Appreciation?

Overall sales volume and price appreciation have declined. However, Seeff remains optimistic about the stability of the property market as the average price growth is hovering around 2%, which indicates that prices are unlikely to plummet compared to other global markets that saw a surge in prices during COVID-19.

Buyers can also enjoy peace of mind knowing that local banks are reporting no significant financial distress, and deposit requirements are still generally below 10%. This is a considerable improvement from the post-2009 period.

As Seeff advises sellers to keep their asking prices realistic in light of the current financial climate, buyers can look forward to finding their dream home at a more affordable price.

How Does the Interest Rate Hike in South Africa Affect Bond Repayments?

The recent interest rate hike in South Africa will cause monthly bond repayments over a 20-year term to increase. The approximate increase is as follows:

• R750,000 bond – extra R255 from R7,614 to R7,869.
  
  
• R900,000 bond – extra R306 from R9,137 to R9,443.
  
  
• R1,000,000 bond – extra R341 from R10,152 to R10,493.
  
  
• R1,500,000 bond – extra R511 from R15,228 to R15,739.
  
  
• R2,000,000 bond – extra R339 from R20,305 to R20,985.
  
  
• R2,500,000 bond – extra R424 from R25,381 to R26,231.

Are you feeling uncertain about how the recent interest rate hike in South Africa may affect your property plans? Don't worry, the Seeff Property Group is here to guide you.

Our expert team will help you navigate the buying process. We understand that financial pressures have made you more selective, but we can help you find a home within your budget and despite the current market conditions. Simply contact us today.