Rates decision underlines positive prospects for property

Private Property South Africa

A stable interest rate environment will further boost the property market, which has started the year in a positive fashion.

The current positive sentiment in South Africa’s real estate market is bound to be strengthened by the Reserve Bank’s decision last week to leave interest rates unchanged, and an increase in the number of home sales is to be expected as a result.

That’s the word from Rudi Botha, CEO of BetterBond, SA’s biggest bond originator*, who says consumer confidence has been boosted in recent weeks by the election of Cyril Ramaphosa as leader of the ANC, a significant improvement in the rand/dollar exchange rate, declining inflation and the prospect of lower fuel prices.

“And this is already translating, in the real estate market, to a resurgence of buyer demand and an increase in the number of home loan applications we are receiving each week.”

The Bank’s decision, announced by Governor Lesetja Kganyago, means that the repo rate will remain at 6,75% for at least the next two months, and that the prime interest rate and home loan base rate will both remain at 10,25%, which is good news for existing home owners as well as prospective buyers.

“It means,” notes Botha, “that first-time buyers still have an opportunity to qualify for a home loan at their current salary, and at a relatively low interest rate that will make their home loan instalments more affordable – especially if they have already saved up a sizeable deposit.

“In addition, they will be able to take advantage of the current ‘buyers’ market’ in which there is a wide choice of homes to buy and prices are more negotiable. It will also be easier for property investors to continue to build up their portfolios of rental properties, and for existing home owners to upgrade to bigger or more expensive properties should they wish to do so.”

Stable rates will also make it easier, he says, for existing homeowners to keep up with their home loan repayments over the next few months in the face of rising costs such as the impending electricity tariff increases, and hopefully even to pay an additional amount into their home loans to build up the equity in their properties and reduce their debt exposure.

“This would certainly be a wise move ahead of the Budget to be presented by the Finance Minister next month, which it is widely believed will introduce significant tax increases that will negatively affect most household budgets. SA also still faces the risk of a further downgrade by the ratings agencies, which would cause the value of the rand to fall back and inflation to start rising again - and is one of the main reasons for the Reserve Bank to place interest rates in a holding pattern at this stage.”

Meanwhile, says Botha, prospective buyers should be sure to apply for their home loans through reputable bond originators like BetterBond, for two reasons. “The first is that this will more than double the chance of their application being approved, and the second is that this will ensure they get the best available bond deal to suit their personal financial circumstances.”

*The BetterBond statistics represent 25% of all residential bonds being registered in the Deeds Office and are thus a reliable indicator of the state of South Africa’s residential property market.


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