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Interest Rate Hikes – There is Hope in the World of Real Estate

Property owners, landlords, and tenants are feeling the pressure of South Africa’s latest interest rate hike. However, there is a silver lining.

Our independent bond originators in South Africa have been following the market closely and aim to put your mind at ease as we explain how home owners, landlords, and tenants can still benefit from staying in the property market.

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Interest Rate Increase in South Africa – It’s Not All Doom and Gloom

Home Loans are Still Achievable

Due to the rising interest rates in South Africa, buyer affordability has taken an obvious knock. Over the last year, interest rates have increased from 7.5% to 10.5% which has chipped away at the average person’s disposable income. However, this has not affected home loan providers’ willingness to award home loans to buyers.

In fact, home loan providers are still eager to secure qualified buyers – especially first-time buyers and, for the most part, are offering below prime interest rates. Financially secure buyers who prefer not to put down a deposit also have access to 100% and 105% loans.

However, it’s important to note that choosing a higher loan-to-value ratio will attract higher interest rates than a purchase with a substantial deposit. Therefore, it’s always advisable for prospective buyers to save as much as they can for a decent deposit rather than completely pausing their purchase plans.

The best way to navigate this territory is to get advice from experienced and qualified bond originators who can provide you with accurate insight into what your financial circumstances allow. If necessary, they can also help you find ways to improve your credit record.

Prices are Not Growing Too Fast for Buyers

Surprisingly, South Africa’s property values have remained resilient this year, despite global insecurity affecting property markets. Although some pockets of property have performed better than others, overall performance has retained stability. Growth figures have remained relatively stable at around 3.5%.

This is a glimmer of hope for current homeowners and prospective buyers alike. Current homeowners can take a deep breath as they preserve the value of their money in a secure asset. Those planning to invest in property in South Africa can still find great value for money in the property market.

Tenants and Rental Rates are Stabilising

According to Jacqui Savage, national rentals manager for the Rawson Property Group, South Africa’s rental market is ending on a good note. Out of the five price brackets, three have shown modest escalation.

Additionally, payment behaviour in tenants have also stabilized in the post-pandemic climate. The mid- to upper-level rental brackets, especially the R12 000 – R25 000 bracket, are experiencing an 87% good standing rate. This indicates that a healthy equilibrium has been reached between rental escalations and tenant affordability – a good foundation for further market recovery in 2023.

Year End Bonuses Can Boost Savings

Although not everyone will be lucky enough to get an annual bonus, there are those who will. This is an opportunity for homeowners to invest extra income into their bonds, potentially saving them thousands of rand in the long run. Furthermore, those receiving bonuses and planning to purchase property in the future can reduce the size of the loan they’re applying by using this extra cash injection to boost their deposit. Bigger deposits attract better finance offers from lenders.

Is it Still a Good Time to Buy?

Hearing about interest rate hikes can place immediate doubt in the mind of a prospective buyer. However, there are 4 factors that prove it’s still a good time to invest in property in South Africa:

  • Increased interest rates have the potential to slow down new demand for property which automatically decreases property prices. This mean’s that it is still a buyer’s market
  • In some parts of the country, property prices remain affordable
  • The revised interest rate remains one of the best that South Africa has experienced in the last two decades
  • To compete for home loan business, banks are continuing to approve home loans with reasonable terms

Buying property is one of the best investments as it provides long-term safety and investors now have the opportunity to take advantage of the new wave of tenants who are still looking to rent property rather than buying their own.

Phoenix Bonds – Bond Originators in South Africa

Research shows that buyers who only obtain one home loan quote will end up repaying their loam loan at an interest rate that is much higher than those who obtained several home loan quotes.

Our bond originators work hard to find you the best possible home loan offers and can assist you with the entire process.

Click here to get started!


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