Property on the Christmas list? Still a great time to buy despite small rate hike

It is still a great year to put property on your Christmas list despite the recent small interest rate hike. While disappointed that the Reserve Bank decided to hike the interest rate by 25 basis points to 3.75% (base home loan rate to 7.25%), the rate remains well below what it was before the onset of the Covid pandemic.

The increase in repayments is minimal, and home loans are still more attainable. You can still get out of your rental, buy a bigger house or move to a better neighbourhood as buyers have been doing since mid-2020.

Based on a calculation done by Seeff's mortgage origination partner, ooba, a home loan of R1 million over a 20-year period will now cost around R7 904 (from R7 753) per month, just R151 per month more while R1,5 million will now cost R11 856 (from R11 629), just R227 more.

Even at the higher prices, the increase is minimal with R2 million costing R15 808 (from R15 506) and R3 million around R23 711 (from R23 259), under R500 more.

The interest rate and positive mortgage lending conditions which are the best since 2007 have been a game changer for the housing market which remains the good news story of the economy, supporting the post-pandemic recovery.

Despite the moderating activity following the buyer frenzy of late last year, the market remains robust with sustained demand in most areas. From the latest Deeds Office data, it appears that monthly transaction volumes have recovered back to the 2019 pre-pandemic level while the market is only about 7% below the 2015 to 2018 average.

For the Seeff Property Group, this has been the best sales year in our 57-year history. We have achieved record prices of up to R55 million and R60 million in Plettenberg Bay, R45 million at the Waterfront (highest since 2012), R40 million in Fresnaye and have just concluded the highest price by an agency in Camps Bay at R52 million.

We expect more of the same going into 2022, supported by the interest rate and favourable mortgage lending conditions. Our expectation is that the interest rate should remain fairly flat, and any further increases should be fairly benign at least until the end of next year.

That said, we remain in uncertain times while the pandemic lingers. The resurgence of Eskom blackouts, drastic petrol price hikes, inflation concerns, and premature interest rate hikes could slow economic growth. Naturally, a weak growth environment could negatively impact the housing market.

It is still one of the best times to buy a house in over a decade. There is a steady flow of good stock onto the market which, unfortunately for sellers, means market-related asking prices are key to a faster sale and higher selling to asking price ratio, especially in the higher price bands.

Buyers will need to act quickly though, especially in the lower price bands and high-demand areas where there is no shortage of willing buyers looking to capitalise on the favourable market conditions.

Samuel Seeff
Chairman, Seeff Property Group