WE'VE TURNED A CORNER
Category Residential Property News
You can almost hear South Africans breathing a collective sigh of relief, as they received the news that the repo rate and prime lending rate remained pinned at 8.25% and 11.75% respectively. Bottom line, NO increase in the home loan rate. Why? "Inflation turned a corner," says Reserve Bank Governor Lesetja Kganyago. The Consumer Price Index dropped back to an appealing 5.4% in June, the lowest reading since October 2021 (5.0%). Statistically, when inflation falls in the SARB's Monetary Policy Committee target range, interest rates become more stable...with hikes far less likely to occur. No guarantees of course, but as Rhys Dyer, CEO of ooba Home Loans explained, "Interest rate increases are the key policy response to rising inflation."
For financially constrained South Africans, this provides a breather, and for the wise, an opportunity to examine and fine-tune the household budget, and take any remedial action to lower spending and eliminate debt - certainly not to take on any additional debt. If you are facing significant challenges with servicing any debt - including your home loan - don't ignore it. It won't go away. Go and speak to your bank or other lender as soon as possible - they're more open to assisting and negotiating than you might imagine.
A stable interest rate is not simply good news for individual homeowners, but the property market as a whole. For sellers in particular, this lightening of the financial pressure on consumers has a knock-on effect. Those financial pressures have led to a quieter property market, with the average time a property stays on the market increasing to 85 days. That's the longest it's been since the second quarter of 2020. Holding the rate is likely to halt that slowdown, and in time - with no external factors to affect it - turn it around.
One sector of the market has seemingly continued to show growth, particularly in certain parts of the country: the first-time homeowner. Yes, they have been as affected by rising interest rates as anybody, but banks are still offering attractive financial propositions to first-time buyers, and that appetite to own your first home is strong among South Africans. The first-time buyer mortgage approval rate moved up to 81,2 percent in June.
The other sector showing growth is for buy-to-let investment properties. It rose to +10.9 percent of all bond originator oobahomeloans' mortgage applications in June. That's positive for both the housing and rental markets.
For the average homeowner, the rise in the bond rate has added financial pressure, particularly at a time when other stressors like increased household expenses and load shedding are put into the mix. There's no more appropriate time for buyers and sellers to talk to the experts - property sales consultants, banks, and bond originators, and those who've been in the property world for many years and have garnered a great deal of experience. As always, the property market is cyclical, reflective of local consumer confidence and a host of other local and international influences. It's fair to say with the rising interest rates, it's been - and will continue for a while, to be - a buyer's market. One to which you, as a buyer can take advantage. More properties on the market, and often more competitively priced.
For sellers, it's vital to price your property according to the current market values. It's tempting to price your property at what you think it's worth, or even, the figure you 'need' to get. In those conditions, in the current market, your home is likely to stay on the market for far longer, and history shows you'll ultimately have to drop the price to that of a market related one. Talk to property practitioners, obtain market assessments from a few different sources, investigate prices of similar properties in your area, ensure that your property is at its best, and always choose experienced, qualified marketers when you decide to sell. A brand and a sales consultant that's fully conversant with your suburb, will provide you with the educated advice, support, and attention, which can spell the difference between the satisfying conclusion of a sale, and not.
Ooba's CEO, Rhys Dyer, shares key predictions for the remainder of 2023
- Homes with solar sell the fastest: "We believe that homes with solar installations - and other forms of alternative energy - will spend the least amount of time on the market and sell for more than those without."
- Property as a strategy to create generational wealth: "Despite economic uncertainty, property is still viewed as a worthy investment. Many buyers are purchasing property with the view of passing it on to future generations and/ or letting it out to generate a steady income stream. This is particularly evident when looking at the current buy-to-let statistics."
- Aspirant young homebuyers are still engaged: "Studies show that our next generation of home buyers - Gen Zs - prioritise homebuying and we expect them to start entering the market in the next few years. Despite the dip in first-time homebuyer applications (now accounting for 48% of our Q2 '23 intake), they remain a key target audience and making homebuying accessible to them through financial education, competitive interest rates and the First Home Finance program."
- Home prices will remain subdued: "Nationally, HPI will remain subdued and in a strong Buyers' Market, we expect that sellers will continue to compete aggressively by offering attractive deals."
- Deposits are always a good idea: "Potential homebuyers are practicing patience and spending their time saving up for deposits. Our latest data shows that homebuyers continue to prioritise deposits more than ever before (now at 10% of the purchase price)," says Dyer. "Banks are more willing to approve finance and attractive interest rate discounts to borrowers who have equity in the property" he concludes.
Author: Myles Wakefield | CEO
