Best buyers’ market in 35 years
Decades-long low in borrowing costs makes this an affordable time to snap up your dream home
IF YOU ARE still wondering when the best time to buy a home is, this is it, while interest rates are low, according to two leading property experts.
As real estate transactions head back into operation under the more relaxed lockdown level 3, “we also enter the best buyers’ market in m ore than 35 years in the industry,” Seeff Property chairperson Samuel Seeff said yesterday.
The latest interest rate cut took the repo rate to 3.75%, below 4% for the first time since it was introduced in 1998 as the SA Reserve Bank’s main policy instrument. The mortgage lending rate now stands at 7.25% for the first time since 1966.
“These rate cuts represent a near five-decade low reduction in borrowing costs and improving affordability,” said Seeff.
Multinet home loans chief executive Shaun Rademeyer said: “Even though the market was under pressure, we have unlocked a new buyer in the market: add that house prices will not be growing, it’s the best time to buy.”
Rademeyer said while there had been a sharp drop-off in home loans applications at the end of March and part of April, year-on-year figures for May showed only a 15% reduction in volume.
“We started to see a small increase in registrations in recent weeks as the deeds office reopened and attorneys could issue instructions,” he said.
A rise in “buy a home” internet search terms showed also that the recent interest rate cuts had stimulated interest among buyers, added Rademeyer.
“In 2019, you would have needed to earn a household income of R28 951 to afford a R1 million home, now that has significantly reduced to R23 711, almost a 20% reduction in gross income,” he said.
Seeff said that if you had bought a R1m property at 10%, before the rate cuts, your gross monthly income requirement was about R33 000 a month. This had since been reduced by more than R5 000, a significant benefit for the buyer.
Seeff said that it was now an especially favourable time for the low- to mid-market range to R1.5m (R3m in some areas), where the bulk of activity was currently being seen.
Stock levels were also higher than what they have been for some time.
In many low- to mid-price areas it was almost cheaper to buy than rent now, he said.
Investors could also use the low interest rate to their advantage.
Sellers in the low- to mid-price ranges should still be able to sell faster.
Additionally price growth in this sector was also likely to fare better compared with the higher price bands.
The upper-price bands and super-luxury sector above R8m (R15m in Cape Town) were, however, expected to remain muted and sellers would need to price competitively, added Seeff.
That said, the super-luxury sector also offered the best opportunity for bargain hunting in 35 years, particularly for foreigners who also would benefit from the rand depreciation.