The 0.25 basis point interest rate hike announced by the South African Reserve Bank this afternoon was extremely positive and, while it may inject a little caution, it will not frighten buyers out of the market.
“In fact, we see this as extremely positive. It is a sign that interest rates are leveling off to be in line with pre-Covid levels,” Chris Tyson, founder and chairperson of national real estate company, Tyson Properties, commented.
Nick Pearson, CEO of Tyson Properties, said that the sector had already weathered a number of rate increases since November 2021 when the Reserve Bank began to hike interest rates upwards from what many believed to be unrealistic lows during the Covid-19 pandemic, believes that there has been a correction in interest rates over the past year and that this latest increase – which is likely to be one of or even the last in this cycle – will enable both buyers and sellers to readjust to a post pandemic economy.
“That doesn’t mean that there are going to be less transactions – but an interest rate hike definitely forces people to be more correct when it comes to pricing their properties for sale or making an offer on a property,” he said.
Pearson added that an interest rate hike also forced more homes on to the market, particularly those priced under R3,5-million.
At the same time, it also reduced the number of first time buyers in the market. “The rental market will become more buoyant with more people choosing to rent rather than buy,” he continued. This is in marked contrast to an increase in the number of first time home owners when interest rates were low as more people could afford to pay back home loans.
“We did see an impact last year when interest rates went up and this will definitely happen again this year. The problem has been that a lot of things have happened at once – interest rate increases, the intensification of load shedding, climbing inflation which has reduced households’ disposable incomes, higher petrol prices and water issues in Gauteng and KZN,” he noted.
However, he said that an interest increase would affect different parts of the market differently with wealthier buyers more likely to weather the increased cost of home loan repayments. In addition, different provinces were also likely to respond differently with Pearson noting that the rates hike was unlikely to stem demand or slow the more buoyant market in the Western Cape.
Pearson said that South Africans had proved resilient over the difficult 2022 year when the country began its challenging recovery from the pandemic and he did not expect this to change during 2023. Whilst the market had shown signs of fatigue towards the end of last year, it had been far more buoyant at the start of this year and would probably remain more positive despite the recently announced rates hike.
He added that, what interest rate adjustments did highlight, was the need for well trained and knowledgeable real estate professionals who were able to advise both buyers and sellers on how to negotiate the current market and how to factor in the possibility of changes going forward, he concluded.
CLICK HERE to submit your press release to MyPR.co.za for free.
Press Release Views since 1 July 2022: 50
