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Latest Rate Hike Will Add To The Bite, But Property Outlook Remains Stable – Seeff

Following the announcement by the Reserve Bank to hike the repo rate by another 25bps to 7.25% (base home loan rate to 10.75%), Samuel Seeff, chairman 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 in view of 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 some expectation that the FED may now halt rate hikes as a reprieve to the economy.

Global energy prices have also settled while the Rand has stabilised. At the very least, the interest rate should now stabilise and support stability in the economy and property market. Hopefully, it seems that we could perhaps again start seeing the rate come down towards the latter part of the year.

The residential market has come off two very successful years as a result of the Covid-induced low interest rates. Seeff says despite the accelerated rate hikes since mid-2022 and the expected slowing in sales volumes, the market still ended the year on a solid foundation, and we enter 2023 with a stable market.

While there is no doubt that 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 a variety of other reasons, we will continue seeing demand in the market. We are also likely to continue seeing strong migration to the coastal areas, especially in view of the growing service delivery challenges and Eskom energy crisis.

We are still seeing 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 increasingly 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, due to the latest interest rate hike, home loan repayments over twenty years at the prime/base rate are likely to increase:

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

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

R1,000,000 bond – extra R168 (repayment incr. from R9,984 to R10,152)

R1,500,000 bond – extra R252 (repayment incr. from R14,976 to R15,228)

R2,000,000 bond – extra R337 (repayment incr. from R19,968 to R20,305)

R2,500,000 bond – extra R421 (repayment incr. from R24,960 to R25,381)