COMMENT REGARDING INTEREST RATE HIKES

Commenting on today’s interest rate hike, Barak Geffen, Executive Director of Sotheby's International Realty South Africa says, “Interest rate hikes are a direct consequence of inflation, and the only way the government has of preventing the economy from losing stability.

 

“In terms of the Lew Geffen Sotheby's International Realty Interest Rate Index, which has tracked interest rate fluctuations over the last 30 years, we have found that a 0.5 to 1.0 percentage point increase may have a slight effect on the market, but homeowners generally take increases of up to a total of 3 percentage points into consideration when extending themselves.

 

“Those who have totally over-extended themselves may very well need to think about downsizing or paring down debt in other areas, apart from their property investment, but as a rule of thumb, buyers only usually start to panic when interest rates go beyond a 3 percentage point hike.  So far we have seen a cumulative 2.5 percentage point increase in interest rates since last year. Also bear in mind that peoples’ salaries generally increase on a yearly basis, allowing them slightly more room to extend themselves.

 

“We therefore do not expect to see a flurry of panicked home sales.  Rather, the market appears to be maturing and ‘sobering up’ to a normal reality.”

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