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Send us your realty questions, click here to submit your question.
| 19 Oct 2007 |
Q. Dear Denese, Are you of the opinion that house prices will drop as a result of the interest rate hike? Regards, Susan
A. Dear Susan,
As you are aware the South African Reserve Bank announced a hike of 50 basis points in the repo rate which prompted banks to raise their Prime and Mortgage Bond rates to 14 percent. Indications are that prices will not decrease despite interest rates having increased by 350 basis points since mid-2006. Taking all statistics into account ABSA Bank predicts the house price growth at 14,5 percent for 2007. With the introduction of the NCA, we have seen a slowing down of sales in the under R500 000 market, which may result in property prices in this price range experiencing slower growth than properties above R500 000. Despite the rate increase last week, business continued as usual, as you can see by a few of the sales concluded by Firzt Realtors during the week: Hyde Park - R15 000 000, Glenhazel - R3 735 000, Lyndhurst - R1 200 000, Saxonwold - R6 000 000 and in Waverley, a 2 bedroom apartment sold for R1 380 000. What we have found as a result of the interest rate hike, is that clients are being more thorough in their budgeting for property purchases and purchasing homes within their affordability range. This results in people not over-extending themselves which in turn, has the desired effect of curbing the inflation rate. There is an acute shortage of housing in South Africa and, based on the supply vs demand situation, all indications are that we will continue to see a steady growth in house prices. Wherever possible endeavor to pay slightly more than the minimum monthly installment on your bond. This will reduce both the capital amount and the term of the loan thereby saving you money in the long term. I hope this answers your question.
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