Comment on interest rate announcement

While it was announced yesterday that the prime interest would remain at 8.5% for the remainder of 2013, property owners should make the most of the current rate before possible increases are implemented during the course of next year, says Adrian Goslett, CEO of RE/MAX of Southern Africa, following the announcement at the last Monetary Policy Committee meeting of 2013.

“It is quite likely that we will start seeing the interest rate increase during 2014, which will put slightly more pressure on those with already high-debt-to-income ratios. Consumers have enjoyed a remarkably low interest rate for the past few years with the prime interest rate dropping by a staggering 5.5% since the property boom, which has opened up several opportunities to buyers who were previously unable to afford property. Aspiring homeowners that have waited it out before taking the opportunities presented in the current market may soon find themselves missing out if they do not act now,” says Goslett.

He warns that favourable conditions for buyers will not last forever, as demand and interest rate increase. “We have already seen significant changes in the market with higher numbers in sales transactions over the past two years and things certainly looking up for sellers,” he says.
He notes that the growing demand for property has also pushed property prices up, with some regions seeing prices far beyond what was seen during the boom. In terms of affordability, buyers could soon find themselves in a similar situation as they did during the boom period.
“While there are buyers with the means to be able to purchase property with cash, the large majority of the South African population is dependent on obtaining finance for buying a home. With this in mind, it is expected that the predicted rate increases during 2014 will impact on both the affordability levels of buyers wanting to enter the market as well as existing homeowners with bonded properties,” says Goslett. “When it comes to buying property, timing is essential.  If buyers hesitate too long before jumping into the market, they will be purchasing property at a higher premium in a market with diminished property stocks,” he concludes.

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