STABLE INTEREST RATES LEAD TO HOUSING MARKET BOOM

The Monetary Policy Committee (MPC) has again announced that interest rates will remain stable, keeping the repo rate at 3.5% and the prime lending rate at 7%.

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, interest rates are likely to remain low as we head into 2021. “There is the possibility that there will be a slight increase of around 0.5 points for 2021, but this should not have a great impact on the property market. As things stand, the low-interest rates (in conjunction with other factors) have created a housing market boom, particularly within the first-time buyers’ market,” he explains.

Goslett remarks that the property market as a whole has made an unexpectedly fast recovery after months of inactivity during Alert Levels 5 and 4 of the national lockdown. “As a region, our reported sales figures year-to-date for October is up by 3% from last year. This is following three months during hard lockdown (from April to June) where our sales figures dropped by as much as 62% YoY. A possible reason for the fast recovery we have seen is that many have had to adjust their living situations and lifestyles to suit the post-lockdown world. The low-interest rates have also made it incredibly appealing for first-time buyers to enter the market,” he elaborates.

According to Carl Coetzee, CEO of BetterBond, not only is it the ideal time to apply for a bond – as the lower interest rates have made homes 30% more affordable – it is also a good opportunity for those with the financial means to pay more into their bond to reduce their overall repayment period. As it stands Coetzee notes that the difference from 10% to 7% on a R1 million home means a monthly repayment saving of around R1 900 and a staggering R455 000 over the 20-year bond term.

For those who can afford to do so, Goslett encourages buyers to enter the property market while interest rates are at this record-breaking low. “While it is unlikely that interest rates will return to their previous levels of around 10% within the near future, I would still caution buyers to leave room in their budget for future interest rate hikes over the period of their lending term. I would also encourage them to make the most of the current market conditions before it changes into a seller’s market – which could happen within the months to come if activity continues to remain as high as it has been in the last three months,” he concludes.