Higher interest rates affect property buyers
Most homehowners don't afford their bonds because of higher interest rates.
Property markets across the country are facing a shift in activity following the steady stream of interest rate hikes that have put pressure on household budgets and squeezed buyers’ affordability levels.
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, warns consumers that the property market is already beginning to change as a result of the higher interest rates.
“Based on our website traffic, we are noticing that across the country there has been less interest from buyers and more leads from homeowners who are looking to sell,” he notes.
Speaking about Kempton Park, Benoni and surrounds, Neville Brits, broker/owner of RE/MAX Dazzle, explains that their markets have noticed the same shift.
“Our markets rely heavily on bond finance and therefore any adjustment in interest rate will slow down the sales rate. At present, almost 90% of our clients require some sort of finance and the more expensive money is to lend, the slower the sales rate will be.
“It also has increased the amount of sellers coming into the market because they cannot afford their bonds as a result of the higher rate. Many clients in our market have 85% to 95% loan-to-value so they feel the pinch much quicker than people who have more equity in their home loan or much lower loans,” said Brits.
Brits explains that the financial pressure as a result of the interest rate increases is one of the more common reasons for selling in their areas of operation.
“After that, semigration and immigration are the second largest motivators for selling in our areas. Many people are tired of the safety concerns, crumbling infrastructure in the local authorities and lack of service delivery. They want to move to places that can fulfil those needs,” he added.
Brits explains that this means that buyers are spoilt for choice with so many homes on the market at the moment.
“This essentially means that they want to pay less and expect more from a house than they would have a year earlier. We are also noticing that security, lifestyle estates, and access to good schooling remain important factors among buyers.”
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