Samuel Seeff says the outlook for the property market remains stable and active despite the decision by the SA Reserve Bank to hike the repo rate by another 50bps to 7.75% (base home loan rate to 11.25%).
He says further that the property market is mindful that the SARB faced a difficult decision. The Eskom energy crisis, weak business confidence, deterioration of the CPI inflation to 7% in February (from 6.9% in January), and pressure on the currency left little room to manoeuvre.
That said, we believe the 50bps is a bit steep, and the SARB could have kept it to 25bps. Nonetheless, the hike was largely expected and already factored in by the market, says Seeff. While not ideal, the rate is still below the historic average of the last 20-30 years, and we are still seeing a strong, stable property market.
Incidentally, Seeff says that at 11.25% the interest rate is only slightly above what it was just after the 2008 Global Financial Crisis. In mid-2008 when the GFC crisis peaked (exacerbated in SA by the introduction of the National Credit Act in 2007 (NCA)), the interest rate spiked to 15.5%.
That said, the higher interest rate will affect buyers and homeowners. It will result in higher repayments of home loans and other credit, and put further pressure on the cost of living and disposable income.
However, says Seeff, the impact of the higher interest rate is to some extent mitigated by the continued favourable bank lending climate, which is still the best in over a decade, and considerably better compared to the post-2007/8 NCA/GFC period. The increased transfer duty exemption threshold to R1.1 million is also a positive for buyers.
While overall sales volumes have declined compared to the highs of 2021, Seeff says it remains business as usual with buying and selling continuing daily. The monthly transfers also still appear to be slightly ahead of the pre-pandemic levels.
Although price appreciation continues to decline, standing at around 2% on average, the flat growth means that prices are unlikely to plummet compared to other global markets that experienced runaway price growth during the Covid-boom.
Another positive for the market is that the banks are not reporting any significant spike in financial distress. Competition among the banks means that deposit requirements are generally still below 10% and approval rates at well over 80%. This too is significantly better compared to the post-2009 period.
FNB for example recently reported that selling due to semigration for better service delivery and quality of life still seems to outpace financial related selling in the market.
The Seeff Property Group continues to assess the outlook for the property market as stable. That said, buyers have become more selective due to financial pressures, and while there is still a good market, it is now incumbent on sellers to set their prices at realistic levels if they want to sell.
Due to the rate hike, the monthly bond repayments over a 20-year term will increase by approximately:
- R750 000 bond – extra R255 from R7 614 to R7 869
- R900 000 bond – extra R306 from R9 137 to R9 443
- R1 000 000 bond – extra R341 from R10 152 to R10 493
- R1 500 000 bond – extra R511 from R15 228 to R15 739
- R2 000 000 bond – extra R339 from R20 305 to R20 985
- R2 500 000 bond – extra R424 from R25 381 to R26 231
Article Source: https://www.myproperty.co.za/news/market-and-opinion/here-is-how-much-your-home-loan-repayments-will-be-31-03-23