Belt tightening ahead for homeowners as interest rate climbs

Homeowners and buyers will need to continue tightening their belts as the interest rate climbs and the economic and property market recovery takes longer than hoped.

This follows the Reserve Bank’s Monetary Policy Committee (MPC) decision to hike the repo rate by 25 basis points to 6.75% (from 6.50%), increasing the base home loan rate to 10.25% (from 10%).

We had hoped for a stay though and that despite further inflation creep to 5.1% (although still within the 3%-6% target range), there was still reason to hope for a stay ahead of the festive season which could bring a much needed economic boost.

Nonetheless, even with this hike, the interest rate is still at some of the best levels in years and the Seeff Group does not expect much of an impact on the property market. The bigger impact is coming from the socio-economic environment and only once some of these challenges are resolved are we likely to see the next upward phase.

May General Election

While we are looking forward to a much improved 2019, the reality is that with the General Election scheduled for May, it is likely that any uptick will only really be seen from around mid-2019. We are, therefore, likely to kick off 2019 on much the same foot as we are now and will need to be patient for a while longer.

Once the May General Election is out of the way and if we get a positive result that reinforces a mandate to President Ramaphosa to continue his reforms, we will see this translate into more positive sentiment, so critical for the economy and property market.

The president has demonstrated his commitment to rooting out corruption and maladministration and returning to good governance. Recent successes with his investment drive adds further to the positive outlook.

In the meantime, we welcome the busy summer tourist months, a time when there is generally more positive sentiment in the property market. Conditions remain favourable for buyers who are able to find good value given the flat price growth and rising stock levels, but don’t wait too long.

All economies and property markets go through cycles of ups and downs and many will tell you if only they had bought at a particular time. While price growth has flattened, there has been no price devaluation yet and it is still safe to invest in property.

Source: bizcommunity.com