6 minute read
Interest rates: good news for buyers and homeowners
BY BONNY FOURIE bronwyn.fourie@inl.co.za
The signs are pointing to hikes reaching their peak soon and stabilising towards the end of the year, creating more opportunities for new entrants as well as correct pricing
IT WAS pretty much a given that the South African Reserve Bank (SARB) would increase the repo rate last month, but with the hike being 0.25%, there is little for homeowners and property buyers to be bitter about.
Experts predicted that the best-case scenario would be a 0.25% increase and the worstcase a 0.75% raise, leaving many people holding out for a 0.5% rise as a compromise.
When the announcement was made, many people were breathing a sigh of relief.
While a rate hike is never welcome news, Samuel Seeff, the chairperson of the Seeff Property Group, says that because it was expected, it was largely factored in by the property market.
Still, he feels that the SARB could have kept the rate steady, as a reprieve for the economy and consumers, especially considering the escalating Eskom energy crisis.
He hopes to see the rate coming down towards the latter part of the year.
Understandably, says Tony Clarke, the managing director of the Rawson Property Group, people are feeling the everincreasing pinch of the recent series of hikes, but, in the long run, not increasing them will do more harm.
“A potential hold on the rate could follow in May and July, with the latter part of the year seeing another 0.5% increase in total.
“Looking even further ahead – if current hikes have the desired effect – we could start seeing reductions in the latter part of 2024.”
While there is no doubt that the higher interest rate will weigh on the market and result in “slightly fewer” buyers, Seeff’s assessment is that the market will remain stable and see “good activity”.
“People always need a roof over their heads, lifestyle needs change, and for a variety of other reasons, we will continue seeing demand in the market. We are also likely to continue seeing strong migration to the coastal areas, especially in view of the growing service delivery challenges and Eskom energy crisis.
“We are still seeing strong support from the banks, with mortgage lending remaining favourable for the market.
“Buyers should therefore not hesitate to get into the market, but must now factor in the higher costs.”
Furthermore, asking prices will increasingly come under pressure, and sellers will need to heed the advice of local agents if they want to take advantage of the demand in the market, he says.
But while homeowners may be justifiably concerned about the potential impact on their property values, Clark says the reality is not nearly as dire as popular opinion would have them think.
“There are a lot of myths and misconceptions doing the rounds on the property market. A lot of them are easy to believe because they tie into our biggest fears as property owners, buyers and sellers.”
Instead of falling prey to panic, however, he encourages homeowners to separate fact from fiction – preferably with the help of a property expert – before making any decisions that might backfire in the long run.
Adrian Goslett, the regional director and chief executive of RE/Max of Southern Africa, advises homeowners and future buyers to prepare themselves for the worst-case scenario of having interest rates climb by roughly 1% over the course of the year.
“It is better to make room in your budget now than to be caught short if interest rates do climb further.”
He adds that the effects of the interest rate hikes are becoming more evident.
“The total number of registered transactions lessened during the last quarter of 2022. Following this latest interest rate hike, it is likely that the property market will quieten down somewhat further over the course of the year.”
The good news, says Carl Coetzee, the chief executive of BetterBond, is that the country could be heading for the peak of this cycle of interest rate hikes.
“We could see interest rates start to stabilise in the coming months and, hopefully, even drop towards the end of this year and into next year.”
It’s important to take the long view when it comes to the housing market and buying property.
“Our Reserve Bank acted swiftly to curb inflation by starting to increase interest rates in November 2021. That’s why we think today’s increase may be one of the last hikes for a while.”
If that proves to be the case, he says it will give homeowners some welcome breathing room as they grapple with food, fuel and electricity costs, and load shedding.
“It could also create more opportunities for new buyers to enter the housing market by investing in homes of their own in the near future. And that would be good news for our economy too.”
Andrew Golding, the chief executive of the Pam Golding Property group, also hopes that the country has reached the peak of the interest rate cycle.
For the housing market, however, he says activity remains steady across all sectors, buoyed by favourable bank lending as well as cash buyers, particularly in the luxury market. Soughtafter nodes also continue to experience high demand.
Rhys Dyer, the chief executive of ooba Home Loans, also believes that the “moderate increase” is one of the last rate hikes this year.
Current and potential homeowners can possibly breathe a sigh of relief.
“With the exception of a possible single small additional rate hike this year, I believe that we are now out of the woods, and that South Africans can start to plan around the interest rate of 10.75% to 11%.
“We also believe that this stabilisation will allow more buyers to better budget their monthly repayments, knowing that we are at the peak of the interest rate cycle.”
Echoing this, Chris Tyson, the founder and chairperson of Tyson Properties, says the interest rate hike is “extremely positive” and that while it may inject a little caution, it will not frighten buyers out of the market.
“In fact, we see this as extremely positive. It is a sign that interest rates are levelling off to be in line with pre-Covid levels.”
Nick Pearson, the chief executive of Tyson Properties, believes there has been a correction in interest rates over the past year and that the latest increase, “which is likely to be one of or even the last in this cycle”, will enable buyers and sellers to readjust to a postpandemic economy.
He does state though, that the interest rate increase will affect various parts of the market differently, with wealthier buyers more likely to weather the increased cost of home loan repayments. In addition, the provinces are also likely to each respond differently.
Despite today’s interest rate hike, there arepositive developments to look forward to.PICTURE: COTTONBRO STUDIO/PEXELS
