We start the year with the second instalment of interest rate hikes following the latest announcement by the Monetary Policy Committee (MPC) to increase the repo rate by 25 basis points to 4%, leaving the prime lending rate at 7.5%.

Although aware that a cycle of interest rate hikes were likely to be in the cards for 2022, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett was hopeful that the interest rate hikes might occur more gradually over the course of the year.

Dr Andrew Golding, chief executive of the Pam Golding Property group said the increase in the repo rate by a further 25bps resulting in a prime interest rate of 7.5% was not unexpected. Samuel Seeff, chairman of the Seeff Property Group says that, ‘while unfair, it is inevitable that the consumer will unfortunately have to absorb the higher costs even though the rising inflation is not as a result of higher consumption.

“Every time interest rates climb, home loans become that little bit more expensive. This can affect activity within the housing market, as fewer people will be able to afford the repayments at the higher interest rate.

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Over time, this could mean smaller buyer pools and downward pressure on asking prices, especially if more homes enter the market owing to affordability issues,” Goslett explains.  Seeff says further that despite the momentum in the market, there has been a steady flow of new stock and while there are stock shortages in some areas and price bands, the market remains well-balanced. Buyers can therefore still benefit from well-priced stock in the market.

Seeff says, the rate hiking-cycle signals some caution for buyers and homeowners to be mindful that we are likely to see further hikes this year and they must buildthatintotheirhome-ownership-plans. Golding says, “while 100% bond applications have stabilised, the approval rate continues to rise, reaching 83.7% in December, approaching the pre- Covid high of 85% in February 2020. In fact, the 83.8% approval rate for 100% loans extended to first-time buyers in December now exceeds the pre-Covid high of 83.1% recorded in February 2020.

For Seeff, PG and RE/MAX have seen has been a booming summer for the coastal areas such as the Atlantic Seaboard, Hout Bay, Southern Suburbs, Strand, Hermanus, Southern Cape and Garden Route, but also for some inland areas such as Ekurhuleni, Centurion, Hartbeespoort, Polokwane and Secunda.

Regarding the outlook for the rest of the year, Goslett remains cautiously optimistic for whatever lies ahead. “The property market has experienced two years of hyperactivity despite the economic challenges we have faced.

While it is likely that we will see activity subside this year along with any interest rate hikes, the South African real estate market is resilient and the demand for homes will always exist in some shape or form. Says Dr Golding: “The positive start to the year in terms of enquiries and activity, underpinned by ongoing consumer demand and favourable lending conditions, heralds an encouraging outlook for 2022.”

Seeff said, despite the booming activity in 2021 rate hiking-cycle signals some caution for buyers and homeowners to be mindful that we are likely to see further hikes this year and they must build that into their homeownership plans.

Source: RE/MAX; Seeff and Pam Golding Properties

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