Industry players urge prospective homeowners to take advantage of buyers’ market and unchanged interest costs
South Africans are resilient and have become accustomed to the blows of economic struggles and political uncertainty, so when we get a lifeline, no matter how short, we graciously accept it.
The latest reprieve is the announcement that the repo and interest rates will remain unchanged. Moody’s decision to hold off on publishing the country’s new credit rating is welcome news for prospective property buyers, but if they are serious about owning a home, they will need to make a move, and fast.
The repo rate will stay at 6.75% and the interest rate at 10.25%, and ultimately means there will be no increases in home loan and car instalments, or personal loan, credit card, and store account repayments until at least after the May general election, says Rudi Botha, chief executive of bond originator BetterBond.
Household expenditure is currently declining so static interest rates are needed to support growth and offset petrol and electricity tariff increases, he says.
“Stable rates will hopefully also encourage existing homeowners to pay more than the minimum home loan instalment every month and get their properties paid off in far less than 20 years.”
Botha encourages prospective buyers to get pre-approval for a bond now as property prices are expected to “rapidly” escalate after the elections, which will make it more difficult for buyers to qualify for a bond.
Furthermore, the market is still favouring buyers, says Pam Golding Property Group chief executive Andrew Golding. For this reason, many prospective buyers, particularly young families and singles eager to take their first steps on the property ladder, are “pressing ahead”.
“For first-time and other buyers seeking finance to acquire residential property, the stable and still relatively low-interest rate provides further incentive to commit to investment decisions, and thereby provide further stimulus and impetus for the property market.” Regional director and chief executive of Re/Max of Southern Africa, Adrian Goslett, encourages buyers to enter the market “as soon as possible” before prices climb.
“Following the elections in May, it is possible the market could begin a gradual shift into a seller’s market, lessening the opportunities for buyers to pick up a good deal.
“Beyond this, should inflation continue to rise and the Monetary Policy Committee later decide to raise interest rates, buyers who get into the property market early will have bought themselves a few months of lower bond repayments in the early years of their bond’s lifespan, when most of your monthly instalment goes towards paying off interest.”
While now is a good time to buy, sellers need to focus on their asking prices, especially at the higher price levels where there is a discretionary market in operation, says Samuel Seeff, chairman of the Seeff Property Group.
“The latest FNB Price Index shows price growth has declined further since the start of the year and now stands at around 3.7%, down from 4% in January and 3.9% for 2018.
At the same time, the banks’ valuers report that property stock levels continue rising, resulting in a deteriorating demand and supply balance.” An increasing number of sellers has to drop their asking prices to conclude deals.