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Economists are predicting the housing market in South Africa to deteriorate as interest rates are anticipated to rise between 1.5% and 3% per annum during 2016. South Africa has already experienced a 1.25% increase in the last year, culminating with the recent 0.5% hike levied recently by the commercial banks.


Bruce Campbell, the local chairman of the Institute of Estate Agents of South Africa, points out that a bond of R800 000 in January 2015 cost the buyer approximately R7 200 per month over a 20 year term. Today, the instalment is in the region of R7 850 per month, if you are lucky enough to be granted a bond by your bank at the prime interest rate. He also pointed out that some banks have recently offered his clients 2 or 3 % above the prime rate for bond finance!


Affordability will now become an issue as interest rates increase as predicted, during the year. Bruce Campbell pointed out that a purchaser of whom qualified for R800 000 bond at the beginning of 2015 would now, due to the interest rate hikes, only qualify for a bond in the region of R726 000.  Unless of cause, he/she was lucky enough to get an increase in salary at the beginning of 2016. However, the increase in salary would have had to be in the region of 9% to equate to qualifying for a similar bond. And this is without taking inflation into account. The inflation predictions are that our inflation rate will rise above 6% later in the year.


Economists predict that there will be no real house price growth this year, and some are of the opinion that there could even be a slight drop in property prices in real terms.


On this subject, Bruce Campbell stated that the local market (Pietermaritzburg) was surprisingly buoyant at present, particularly in the price range of below about R1.2 million, with shortage of good stock still an ongoing issue. He also felt that price growth should still occur in places such as secure lifestyle estates. Furthermore, with home loans becoming more difficult to obtain, he predicts an increase in demand for residential rental properties and subsequently higher rentals. This ultimately should attract and encourage buy-to-let investors.


*** This Article was Printed in the PMB Property & Homes Launch Edition

Author: Bruce Campbell

Submitted 18 Feb 16 / Views 8185

Pietermaritzburg, KwaZulu Natal

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