SA Interest Rate and how it will affect buyers and sellers

THE SOUTH African Reserve Bank, during the recently held Monetary Policy Committee meeting (MPC) announced an increase in the interest rate of 50 basis points. This also meant an increase in the Prime Lending Rate from 9.75% to 10.25% – which means you will now have to fork out even more.

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As a homeowner, this suggest that you will now pay around R330 more per month for every R1 000 000 you owe the bank on a normal 20 year bond repayment period.

Many economists are, however, predicting that the interest rate will see a further increase by up to an additional 100 to 125 basis points towards the end of the year. This will raise the prime lending rate to from 10.25% to 11.50%.

What this will mean is that on a R1 000 000 bond taken over 20 years at a rate of 11.25% your repayment will be R 10 492.56 compared to a repayment of R 9 485.17 at a rate of 9.75%. With this forecast in mind, many homeowners could possibly decide to sell and downgrade.

The “theme” for this year will aptly be known as AFFORDABILITY and many articles have since been published warning the public not to incur additional debt if at all possible this year. Homeowners feeling the pinch of their bond repayments will have to cut down on unnecessary spending and luxuries in order to absorb these increases.

Many homeowners will decide to downgrade by selling and renting or buying something more affordable. Some investors feeling the pressure of multiple bonds and additional exposure might also decide to re-look at their portfolios and possibly sell-off some property.

This will mean an increase in property in the lower to medium price brackets as well as an increase in the demand for rental and affordable properties. Some investors, not affected by these rate hikes, will be keeping a close eye on the market and try to pick up some good deals. They normally have some cash and as long as the rental income makes sense, they will look at it.

Sellers need to make sure that they don’t fall into the trap of overpricing their properties. They need to make sure that they do their homework thoroughly and then enter the market at the right price bracket so that they can attract buyers. By making use of estate agents, which are specialists in the area where you are selling, you can easily get a couple of valuations and then get an opportunity to assess the situation from there. Don’t just go for the agent with the highest price as this could take too long to sell.

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Well priced, neat and well looked after properties will be seen as good value for money; they will attract more buyers and also sell much quicker. These properties that are overpriced and neglected will struggle to sell at the asking price and will have to drop in price eventually in order to sell. Having said that, I truly believe that every house has a buyer, as long as the price is right.

Currently there are property shortages in many price brackets which mean that sellers can possibly get a bit more for their properties as they have more negotiating power due to an undersupply. As more stock comes into the market, property prices will stabilize and qualified buyers will get more of an upper hand when negotiating on the purchase price.

Buyers also need to do their homework and find out what their credit scoring is and for how much they can qualify. Over and above that, they need to be clear on what they can afford taking all the costs and additional expenses of owning and maintaining a property into consideration. Many bond originators offer a service where they can, very accurately, assist buyers to check their credit scoring, affordability and determine what they will qualify for.

By keeping an open mind, speaking to the right people and getting advice and as much information as possible, you can make sure that you are ready for whatever the market brings. Owning property is still a fantastic investment with great advantages.

Web pic Marnus

For any assistance buying or selling property in Roodepoort and surrounding areas, please call Marnus on 072 264 7806 or email marnus@steynrealty.co.za

http://www.steynrealty.co.za

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