It is still a great time to buy a house, despite the interest rate spike

If you are considering buying a house, then it is still a great time, says Samuel Seeff, chairperson of the Seeff Property Group.

While the decision by the South African Reserve Bank (SARB) to hike the repo rate by 50 basis points to 4.75% (prime rate to 8.25%) will make home loan finance a little more expensive the rate remains well below the pre-pandemic level and was expected and largely factored into the market outlook for the year.

We should now be aware that we are in a hiking cycle as SARB looks to normalise the rate and there is a further 100bps expected this year.

Challenges for the economy include the CPI which, although unchanged, remains at the upper target range while the Rand has come under pressure.

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The low GDP growth outlook could potentially be further impacted by the electricity crisis, fuel and food price hikes, supply constraints and fall-out from the Russian war in Ukraine.

Despite this, Seeff says the residential market continues to hold up well with buyers showing strong confidence.

Although homeowners and property buyers need to adjust to higher home loan repayments, the reality is that the interest rate should remain below the pre-pandemic level.

Beyond the further 100bps, we do not anticipate any further impact on the interest rate. It is still a great time for buyers, but also sellers to take advantage of the conditions, he adds.

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The low-interest rate is strong support for the market, combined with the positive bank lending which is at the best level since the introduction of the National Credit Act in 2007.

Deposit requirements are now as low as 6% to 7% with home loan finance more accessible as the banks continue competing strongly. Mortgage originator, ooba, also reports that 60% of their approved mortgage bonds in the first quarter were above the R1.5-million price level.

While overall sales volumes have normalised following the buyer frenzy of the post-lockdown months, the market is still trading at pre-pandemic levels and we continue seeing strong confidence in the residential market, Seeff says further.

Although driven predominantly by residential buying in the primary housing market, there has been a strong upsurge in the secondary market on the coast and luxury price bands on the Atlantic Seaboard.

We have seen prices top R100-m for the first time in years. Aside from local buyers, there has also been strong demand from semigration and foreign buyers.

Selling is for a variety of reasons dominated by lifestyle changes because of pandemic-related shifts including semigration to the Cape and other areas.

While some are looking to downscale for financial or other reasons, many are selling to upgrade and we have seen more activity in the R3-m to R5-m price bands, he adds.

Seeff says the market remains well-balanced in terms of sufficient supply to meet buyer demand with some exceptions in the high demand price bands and areas. At the same time, house price growth has slowed to around 4% on average (slightly higher in the lower price bands).

The advantage of the flat price growth is that there is still excellent value in the market, especially at the higher price bands and buyers should take advantage. Sellers will, however, need to price realistically or they could miss out on the favourable market phase.

As a result of the latest rate hike, and based on a housing bond at the base rate over 20 years, homeowners and property buyers will need to budget for an extra:

>R750 000 bond: extra R233 (R6 157 to R6 390)
>R900 000 bond: extra R280 (R7 389 to R7 669)
>R1-m bond: extra R312 (R8 209 to R8 521)
>R1.5m bond: extra R467 (R12 314 to R12 781)
>R2-m bond: extra R622 (R16 419 to R17 041)
>R2.5-m bond: extra R778 (R20 524 to R21 302)