Buy while interest rates are low

Now is as good a time as any to buy a home thanks to the slowdown in South Africa’s residential property price growth.

According to Mortgage Plus, as the economy recovers, property prices remain reasonable and the effect of lower interest rates is felt.

Mr AM Prinsloo, provincial sales manager at Mortgage Plus says confidence will return to the bricks and mortar investments.

Would-be home buyers and property investors with cash have an opportunity to get into the property market, he says.

Although the property market got off to a slow start in 2011, estate agents are seeing an improvement in the market.

Pam Golding Properties (PGP) report that sales are being concluded with more people purchasing homes in the more affordable category priced under R2 million.

Last month, Absa Home Loans said affordability remains key in the housing market and more buyers will be looking at smaller and affordable properties.

Carol Reynolds area principal for PGP Durban North and La Lucia says affordability remains the key driver of bond acceptance and that it is imperative to factor household running costs into the equation when looking at buyer affordability.

“Buyers who have the means to put down a sizeable deposit will be better positioned to negotiate with the banks.”

She says in general, one aims for between 15 and 20 percent deposit as banks are beginning to look more favourably on 10 percent deposits.

FNB Home Loans reports a lower rate of household sector indebtedness compared to the previous quarter.

According to the FNB Household Sector and Consumer Update Q2 2011 report, although household indebtedness has come down, there has not been an improvement in the household sector’s saving rate lately.

John Loos, FNB Home Loans property strategist says the household sector does not save enough to fully cover the depreciation of fixed assets in its possessions.

For many households, this translates to lack of money to put down for a deposit towards buying a new home while in others, this impacts on their ability to repay their mortgage loans.

For buyers who have saved money and can afford to buy, now presents a good opportunity as interest rates are at their lowest, he says.

He explains that in the past few years, estate agents surveyed pointed to a greater portion of home owners not doing full home maintenance and the number of those still maintaining their homes or doing any upgrades has declined since the boom years.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

The Monetary Policy Committee’s decision on Thursday to keep the repo rate at 5.5% and prime lending at 9% comes as no real surprise and offers a continued respite to debt burdened homeowners.

This was widely anticipated and is welcome, said Dr Andrew Golding, CE of the Pam Golding Property group, particularly against a backdrop of rising oil and food prices coupled with increasing electricity tariffs.

“Consumer spend generally remains cautious as a result of ongoing concerns regarding household debt.

“And amid market speculation regarding an end to the current cycle of lower interest rates, it is hoped that interest rates will remain stable at least for the remainder of this year in order to stimulate further economic growth, bearing in mind that job creation remains a key focus,” said Golding.

He said that from a residential property perspective Pam Golding Properties continues to see a gradual, albeit modest improvement in sales volumes and in house prices. “It should be borne in mind that we are still seeing the effects of the latter part of last year’s reduction in interest rates permeate through the marketplace, helping sustain residential sales across most price sectors.

“However, although relaxed to some extent, strict bank lending criteria continue to keep a rein on any significant recovery in the housing market,” added Golding.

He said that while it’s true that interest rates are at a historical low, first-time buyers entering the market still face affordability issues. This is “due to the higher municipal rates and increased electricity costs, among other costs inherent in the purchase and upkeep of a home, and this is exacerbated by restricted access to finance.”

“On a positive note, what we are noticing is that those sellers who are receptive to pricing their homes at realistic, market-related prices are reaping the benefits and achieving sales,” said Golding.

He said that for investors who have access to finance or with high liquidity, there are still good buys to be had, as property prices in the main have remained relatively constant over the past year or so. “Having said that, there are many areas or locations where properties continue to achieve sound growth in value, and will continue to do so, making the case for investment in property as valid as ever”.

While most remain cautiously optimistic about continued economic recovery, said Adrian Goslett, CEO RE/MAX of Southern Africa, there are definite signs of improvement. “Aside from the interest rate remaining stable, The South African Chamber of Commerce and Industry’s Business Confidence Index for January 2011, which is at 87.4, indicates a vast improvement from January 2009 (82.4) and 2010 (81.2).”

It is anticipated that 2011 will be a fairly flat year for the property market, said Goslett, as debt-to-income ratios are still at a relatively high level and as distressed homeowners continue to make use of the various bank programmes to assist them in selling property they can no longer afford.

“As there is still limited access to finance, rental markets are expected to peak while qualified buyers will be able to make the most of the property investment opportunities that are currently there for the taking, a situation which certainly won’t last forever as interest rate hikes are expected later in the year,” said Goslett.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za