More good news for Real Estate

Category SA Property Market

The Reserve Bank decided this week to lower its repo rate by 25 basis points to 6,5% and the prime rate and variable mortgage rate from 10,25% to 10%.

This move will translate, for those currently paying off home loans, into a saving of R83 a month per R500 000 borrowed – or R166 a month on a 20-year home loan of R1m.

In addition, says Berry Everitt, CEO of the Chas Everitt International property group, the rate cuts will mean lower monthly repayments on all other forms of debt, including credit card balances, vehicle finance and personal loans.

“And that will take some of the pressure off household budgets, while increasing the disposable income available to cover rent – or a bond repayment if someone is thinking of buying a home. Prospective borrowers will thus have an easier time qualifying for bonds, and that is positive news for property.

“At the same time, we anticipate that the financial position of tenants will improve and that landlords will be looking at fewer rental defaults this year, especially since the inflation rate has also been falling over the past few months and currently stands at a three-year low of 4%.”

On top of that, he says, the Rand has strengthened by 4,8% against the US dollar in the past two months, and by 3,2% against the euro, and the Reserve Bank expects that these improvements will largely offset the effects for consumers of the VAT and fuel tax increases to be implemented on 1 April.

“Meanwhile, stronger-than-expected GDP growth over the past few months is already boosting both business and consumer confidence, which are vital elements of a revitalised real estate market. The Reserve Bank has also now revised its GDP growth forecast for the year from 1,4% to 1,7%, and this will hopefully also start yielding fruit in terms of job creation, which will further fuel property demand in due course.”

Everitt says that relieving the financial pressure on households should also mean that there will be fewer loan defaults this year, and fewer “distressed” properties coming on to the market. This will help to speed up the absorbtion of the current oversupply in certain sectors of the market.

“Consequently, we are not only anticipating increased home sales over the next 12 to 18 months, but also accelerated home price growth. This means that homebuyers and investors would be well advised not to delay their purchasing decisions now, but to move forward as soon as possible – especially since the banks are currently on a quest for new home loan business.”




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Author: Meg Wilson

Submitted 01 Apr 18 / Views 915