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Buy your first home now, buy a bigger home even; don’t be put off by the interest rate – experts

Do not let the rising interest rate deter you from becoming a property owner. Photo: Pixabay

Do not let the rising interest rate deter you from becoming a property owner. Photo: Pixabay

Published May 20, 2022


If you want to buy a home, now is still a good time, and if you want to upgrade to a bigger property even, you should do that too.

Yesterday’s interest rate hike may have deterred many aspirant homeowners from purchasing property now, especially as the rate is expected to continue increasing this year, but experts maintain that the climate is still positive for buying property.

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Berry Everitt, chief executive of the Chas Everitt International property group, says first-time buyers should not halt their plans to buy property now as home prices will only get higher as the year progresses.

“The main reason is that the unexpectedly high number of potential homebuyers over the past two years has not been matched by a similar increase in the delivery of new homes, with the result that inventory in many areas is already in short supply.”

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Furthermore, the latest building numbers from StatsSA reveal that fewer new homes are being completed, while the number of plans being passed for future new homes is also slowing down rapidly.

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“And we believe this trend will continue to put upward pressure on prices and could have an even greater effect on affordability than the expected interest rate increases over the next few months,” Everitt says.

Therefore, buyers who defer a purchase now may well find themselves priced out of the homes they really want by next year, because they will have to earn considerably more in order to qualify for bigger home loans and prove they have enough disposable income to cover a higher monthly loan repayment.

“Consequently, we would advise all prospective buyers not to delay now but rather to accelerate their purchase plans and work with qualified and reputable estate agents to secure their new homes as soon as possible.”

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He adds that the rate increases “are also making the banks even more competitive” and providing buyers who have good credit records the opportunity to negotiate hard for rate concessions.

Interestingly, Gerhard Kotzé, managing director of the RealNet estate agency group says homeowners who would like to upgrade to a bigger or better property should find it easier to do so following the interest rate increases.

He explains that rate increases generally lower demand, increase the supply of homes for sale, and prompt home sellers to rethink their asking prices – in that order.

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“And as the market is currently experiencing these shifts, now is the time for upgrading buyers to seize their opportunities.”

In addition, thanks to the huge influx of first-time buyers, he says prices have been rising faster at the lower end of the market than at the upper end for most of the past two years.”

“This has been creating the opportunity for astute owners to move up the property ladder by selling their first homes at a substantial profit and using most of this as a deposit on their upgrade home in order to lower their bond requirements – and repayments.”

Kotzé says sales volumes are dropping now following the record volumes seen in the past two years, and that asking prices at the higher end of the market are already consolidating as a result. More stock is also coming to the market as some homeowners experience difficulty in keeping up with home loan repayments at the new rates, or seek to downsize to cut their overall cost of living.

“We find that there is also much more readiness on the part of sellers now to negotiate and reach agreement with prospective buyers, and we expect this to become even more prevalent in the next few months as sellers get more anxious about further interest rate hikes, or eager to upgrade themselves.”

Citing the Absa Homeowner Sentiment Index for Q1 of 2022, Carl Coetzee, chief executive of BetterBond, says 56% of respondents still believe it is better to own a home than to rent. Overall confidence in the property market is higher than it was at the end of 2021, with the sentiment towards buying property increasing marginally. Most of the respondents in favour of purchasing a property agreed that it is because it is a proven investment that accumulates value.

“While rates will fluctuate over time, affecting bond repayments and affordability, there are other reasons for buying a home that remain constant. There’s the satisfaction that comes with owning an asset that will appreciate in value over time, as well as the security of knowing that the home is yours for as long as is needed.”

Rhys Dyer, chief executive of ooba Home Loans adds: “Residential property remains a good investment strategy and we are still seeing sustained activity – particularly around the R1.3 million mark. Most importantly, the banks are continuing to offer extremely competitive interest rates on home loans.”

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Not only it is “still a great time for buyers”, but Samuel Seeff, chairman of the Seeff Property Group, says sellers can also take advantage of the conditions.

“The low interest rate is a strong support for the market combined with the positive bank lending which is at the best level since the introduction of the National Credit Act in 2007.”

He says deposit requirements are now as low as 6% to 7% with home loan finance more accessible as the banks continue competing strongly.

The main consideration buyers must always make, however, is whether there is enough room in their budgets to accommodate rising interest rates. Affordability is always the most important factor to take into account.

Start your search for a property you can afford here.