What the Steady Repo Rate Means for Buyers & Sellers

Repo Rate unchanged – reminding buyers to make the most of the lending rate

“The announcement by the Reserve Bank’s Monetary Policy Committee that the repo rate will remain unchanged at 3.5% is fair news for the economy in general and good news for the property market in particular,” says CEO of Leapfrog Property Group, Bruce Swain. He added: “In the buyer’s market that we’re currently experiencing an unchanged interest rate makes property more affordable and thus more accessible to more buyers, particularly those looking to enter the market for the first time. An active property market is central to igniting our stagnant economy, so an unchanged rate is certainly preferable to an increase.”Director of Kruger Attorneys and Conveyancers Incorporated, Louis Kruger, offers commentary on why individuals would be selling or buying given the low interest rate and current environment:

 

Reasons for Buying:

  • The decreased interest rates make bond repayments competitive with rentals. It is not clear if they have completely considered the additional costs of homeownership, such as rates, taxes, insurance and maintenance.
  • The inclusion of transfer and bond costs in the bond granted is a major drawcard for first time home buyers.
  • Distressed sellers are often lowering property prices to below market value to achieve a quick sale and this is advantageous for buyers, particularly with regard to competitive interest rates being obtained if the property is valued at a significantly higher price.  
  • A further decrease in the interest rates would have no doubt afforded many more first-time homeowners or those currently renting to enter the market as buyers.

 
Reasons for Selling:

  • We find that many of our transactions are from homeowners disposing of rental or investment property in response to the decline in rental property demand due to favourable interest rates.
  • COVID-19 related loss of employment or reduction of income/salaries, coupled with a fear of increases in interest rates
  • A large majority of Sellers are immigrating and require the proceeds of the sale of the property to finalise their affairs in South Africa
  • Another frequently cited reason for selling is divorce – whether the divorces have been incited or encouraged by financial constraints, working from home, stress and depression as a result of COVID is not clear.
  • Selling to upgrade to a larger property to allow for an appropriate “work-from-home” environment or home office.  Remote working now seems to be the new normal.

 

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, is confident that interest rates will remain low for most of next year. “There is the possibility that there will be a slight increase of around 0.5 points for 2021, but this should not have a great impact on the property market. As things stand, the low interest rate (in conjunction with other factors) have created a housing market boom, particularly within the first-time buyers’ market,” he explains.CEO of BetterBond, Carl Coetzee adds: “Many attributed the initial uptick in bond applications and sales activity to pent-up demand, but the protracted recovery of the market suggests that the historically low interest rates have certainly been the predominant stimulus.” He concludes: “With interest rates likely to remain in the single digits until the end of 2022, we encourage buyers to make the most of this conducive lending period by investing in property.”