Homeowners and aspiring buyers across South Africa breathed a collective sigh of relief this week when the South African Reserve Bank (SARB) announced that it would leave interest rates unchanged, despite inflation climbing to 5% in June.
So says Berry Everitt, CEO of the Chas Everitt International property group, who notes that many households had been expecting an increase in borrowing costs after recent spikes in fuel prices, electricity tariffs and municipal charges pushed inflation well above the Reserve Bank's preferred 3% target. “Instead, the Monetary Policy Committee opted to leave rates where they are, recognising that consumers are already under considerable financial pressure.
“And for anyone with a home loan, this decision means monthly bond instalments, as well as other debt repayments, will remain unchanged for now, which is good news at a time when household budgets are already being stretched by higher transport costs and escalating utility bills.”
From a property market perspective, he says, the decision will also help to maintain the positive momentum that has been building over the past year. “Buyer confidence has been steadily improving, demand for well-priced homes has strengthened and South Africa's banks continue to compete vigorously for quality home loan business.
“However, the rise in inflation is likely to have one important effect. While the residential market has been gradually shifting from a buyers’ market towards a sellers’ market, that transition is now expected to happen more slowly than many estate agents had anticipated only a few months ago.”
Everitt hastens to add, though, that this is not because buyers are disappearing. “On the contrary, demand remains healthy in many parts of the country, particularly for properties that are correctly priced and presented. Rather, it is because rising living costs inevitably make purchasers more cautious. Buyers become more value-conscious, take longer to make decisions and are less willing to stretch beyond their original budgets.
“This underlines the need for home sellers to resist the temptation to assume that strengthening market conditions means that they can immediately raise their asking prices.”
He says that one of the biggest mistakes home sellers can make is pricing their property according to what they hope to achieve rather than what buyers are currently prepared to pay. “As has been shown again and again, an inflated asking price may initially
appear attractive, but it often results in fewer viewings, longer marketing periods and eventually price reductions that leave buyers wondering why the property has remained unsold.
“By contrast, homes that are accurately priced from the outset continue to attract strong interest and, in many cases, multiple offers. And in today's market, professional pricing advice from an experienced local estate agent with access to current sales evidence, buyer activity and local market trends has never been more valuable.”
Meanwhile, he says, maintaining the status quo on interest rates could also create excellent opportunities for those homeowners who are planning to upgrade. “By selling now while demand is healthy, owners can take advantage of current market activity and then purchase their next home before property values begin rising more rapidly. In other words, while they may not yet achieve the premium prices that characterise a full sellers' market, they will most likely also pay less for the property they are buying than they would if they delayed their move until the market has shifted further in sellers' favour.
“Coupled with the continued competition among South Africa's banks for quality home loan business and the ability of leading bond originators such as BetterBond to negotiate highly competitive mortgage rates, this creates a window of opportunity that may prove particularly attractive for households planning to relocate or upgrade.”
Everitt also notes that if global oil prices begin easing over the coming year as many economists expect them to, and inflation starts moving back towards the Reserve Bank's target, the prospect of future interest rate reductions will add fresh momentum to the housing market and accelerate the transition to a full sellers' market, with stronger price growth and faster sales becoming increasingly common.
“For now, this week’s decision offers something equally valuable: stability. It gives buyers confidence, protects existing homeowners from higher borrowing costs and keeps the property market moving steadily in the right direction.”
Issued by
Chas Everitt International
For more information
Contact Berry Everitt
On +27 82 441 3601 Or visit www.chaseveritt.co.za
