Latest rate hike will add to the bite, but property outlook remains stable

After the announcement by the Reserve Bank that it will hike the repo rate by another 25bps to 7.25% (base home loan rate to 10.75%), Samuel Seeff, chairperson of the Seeff Property Group, said that, while a rate hike is never welcome news, it was largely expected and factored in by the property market.

That said, perhaps the bank could have paused as a reprieve to the economy and consumers, especially given the growing Eskom energy crisis. There are ample reasons to do so.

Inflation (down again in January to 7.2% from 7.4% in December) appears to have stabilised here as in many global markets, including the US, where there is an expectation that the Fed might halt rate hikes as a reprieve to the economy.

Global energy prices have settled, and the rand has stabilised. The interest rate should now stabilise and support stability in the economy and property market. Hopefully, we could again see the rate come down toward the latter part of the year.

The residential market has come off two successful years because of the Covid-induced low interest rates. Seeff says despite the accelerated rate hikes since the middle of last year and the expected slowing in sales volumes, the market still ended the year on a solid foundation, and we enter this year with a stable market.

While the higher interest rate will weigh on the market, and there will be slightly fewer buyers, Seeff’s assessment is that the market will remain stable, and we should still see good activity.

People always need a roof over their heads, lifestyle needs change and, for various reasons, we will continue to see demand in the market. We are also likely to continue to see strong migration to the coastal areas, especially because of the growing service delivery challenges and the Eskom energy crisis.

We still see strong support from the banks, with mortgage lending remaining favourable for the market. Buyers should, therefore, not hesitate to get into the market, but Seeff cautions that they must now factor in the higher costs.

Asking prices will come under pressure, and sellers will need to heed the advice of local agents if they want to take advantage of the demand in the market.

As a guideline, because of the latest interest rate hike, home loan repayments over 20 years at the prime/base rate are likely to increase:

R750 000 bond – extra R126 (repayment increases from R7.488 to R7.614)

R900 000 bond – extra R152 (repayment increases from R8.985 to R9.137)

R1m bond – extra R168 (repayment increases from R9.984 to R10.152)

R1.5m bond – extra R252 (repayment increases from R14.976 to R15.228)

R2m bond – extra R337 (repayment increases from R19.968 to R20.305)

R2.5m bond – extra R421 (repayment increases from R24.960 to R25.381)