While consumers are justifiably concerned about another interest rate hike this week, ahead of the festive season, the Reserve Bank’s timeous response to inflation means we could see rates drop again towards the end of 2023, says Carl Coetzee, CEO of BetterBond. “There’s no denying that South Africans are feeling the pinch, and another repo rate hike this week will be our seventh consecutive increase. But, it’s worth considering that the Reserve Bank responded quickly to signs of rising inflation by gradually increasing the repo rate from November 2021.” This has enabled consumers to budget accordingly and prepare for the impact on their monthly bond repayments. “While a pain point now for consumers, the Reserve Bank’s strong stance will actually spare further hardship later, as it should help to bring inflation closer to the midline target. Once inflation starts dropping, so too will the interest rate.”
Lightstone’s October report is cautiously optimistic about market conditions, saying that while transfer volumes for 2022 are likely to be less than the 493 000 seen before the property market crashed in 2008, they will still match the 2021 Covid-bounce back. At an estimated 330 000, these volumes are well above the levels seen in 2017 and 2018. Furthermore, although the interest rate increases have affected affordability, especially at the lower end of the market, buyer activity in the luxury residential housing segment is back to 12%, a number last seen in 2015. Lightstone also reports that price inflation for all property bands has outperformed CPI since 2020, despite national year-on-year house price inflation having decreased steadily in the past year. The steady interest rate increase has not dampened banks’ appetite to lend, says Coetzee. “In fact, banks are offering higher loan-to-value bonds to help consumers buy homes. BetterBond’s October data shows that loans of 100% or more accounted for just over 57% of our application intake for this month.” While the market will inevitably slow as affordability continues to be a challenge, there are still opportunities for buyers to invest in property, and for those who meet the criteria, an option to apply for loans of 100% plus. There has also been a 2.3% improvement in BetterBond’s approval ratio over the past 12 months, despite rising interest rates. “The next few months will be challenging for consumers, but there’s light at the end of the tunnel when it comes to the residential property market. As soon as inflation starts levelling off, we should see interest rates drop as well,” concludes Coetzee. “The market has proven its resilience during the pandemic when everyone expected prices to plummet, and we expect it to do the same over the next months as the economy starts to recover.” What goes up, must come down - rate hikes now could mean lower bond payments next year