Latest rate hike will add to the bite
Following the announcement by the Reserve Bank to hike the repo rate by another 25bps to 7,25% (base home loan rate to 10,75%), chairman of the Seeff Property Group Samuel Seeff said that, while a rate hike is never welcome news, it was largely expected and factored in by the property market.
That said, perhaps the bank could have paused as a reprieve to the economy and consumers, especially in view of the growing Eskom energy crisis. There are ample reasons to do so.
Inflation (down again in January to 7,2% from 7,4% in December) appears to have stabilised here as in many global markets, including the US where there is some expectation that the FED may now halt rate hikes as a reprieve to the economy.
Global energy prices have also settled while the rand has stabilised. At the very least, the interest rate should now stabilise and support stability in the economy and property market. Hopefully, it seems that we could perhaps again start seeing the rate come down towards the latter part of the year.
The residential market has come off two very successful years as a result of the Covidinduced low interest rates. Seeff says despite the accelerated rate hikes since mid-2022 and the expected slowing in sales volumes, the market still ended the year on a solid foundation, and we enter 2023 with a stable market.
While there is no doubt that the higher interest rate will weigh on the market and there will be slightly fewer buyers, Seeff's assessment is that the market will remain stable, and we should still 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.
Seeff says there is still strong support from the banks with mortgage lending remaining favourable for the market. Buyers should therefore not hesitate to get into the market, but Seeff cautions that they must now factor in the higher costs.
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.
As a guideline, home loan repayments over 20 years at the prime/base rate are likely to increase by:
R750 000 bond – extra R126 R900 000 bond – extra R152 R1 000 000 bond – extra R168 R1 500 000 bond – extra R252 R2 000 000 bond – extra R337 R2 500 000 bond – extra R421