AA - 2021

Author: Bonny Fourie
25 March 2021

Interest rate decision still favourable for property owners and new buyers

Aspiring property owners have further opportunity to take advantage of favourable buying conditions after the Monetary Policy Committee chose to keep the interest rate unchanged at 3.5%.

The decision, announced by South African Reserve Bank governor Lesetja Kganyago on Thursday afternoon, was largely expected by property players.

While the prime lending rate remains also remains steady at a near 50-year low of 7%, Andrew Golding, chief executive of the Pam Golding Property group says indications are that it is unlikely to dip further.

“So for potential homeowners, it is a reminder that if you are thinking of buying a home, now would be a good time…”

Adrian Goslett, chief executive of Re/Max of Southern Africa, agrees: “Homeowners and first-time buyers continue to find themselves in a favourable position when it comes to the interest rate on their home loan.”

While a further cut would have helped the many South Africans who are struggling to make ends meet within the current economy, he notes that keeping rates at this historic low will “at the very least” make it easier for homeowners to keep up with the repayments on their home loans in the challenging economic climate.

Goslett predicts that the interest rates are likely to remain steady for the remainder of the year but urges homeowners to leave room in their budgets for a possible increase of around 0.5 points during the course of 2021.

“The MPC has warned of two potential increases of 25 basis points in the second and fourth quarters of 2021, but this is all dependent on how the economy performs and many economists predict that an increase is not likely to be necessary. However unlikely it may or may not be, homeowners should just bear this in mind when budgeting for the year ahead.”

Property market activity was greatly boosted last year following the series of interest rate cuts and many agents have reported better sales so far this year than the same period last year. As of February, Goslett says Re/Max’s reported sales for the year reflected 33% growth from the same period last year. Registered sales are also up 50% this year, so far.

“Our partner, BetterBond, has also seen their home loan business grow in value by 46% over this period, underlining how low-interest rates have made owning your dream home a reality for many more South Africans.”

Echoing this, Golding says 2020 saw robust home buying activity.

“In fact, according to FNB, 2020 registered the highest volume of mortgage approvals in South Africa in more than a decade.”

Despite the uncertainties surrounding the pandemic, he says the market for residential property has “so far proven to be one of the country’s more resilient sectors”.

“Combined with generally more realistic pricing, a ripple effect is still filtering through the market, placing upward pressure on demand through the various price bands…

If activity continues at this rate though, Goslett believes it will not be long before the market shifts in favour of sellers, with buyers having to outbid each other to secure the properties they want.

“Before this shift occurs, I would recommend that buyers act fast and make the most of the current market conditions.”

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