How does the lower interest rate impact my property purchase?

The 300 basis point decrease in the repo rate this year came as pleasant surprise to all consumers and to the economy of South Africa. It shows the intention of the Government and the Reserve Bank to assist consumers and protect the fragile economy of South Africa in the current circumstances. Good leadership together with a will to make the hard decisions is what will get South Africa through. The question is, what affect will this latest interest rate cut have on the economy and especially the property market?

For the first time, the repo rate been cut to a record low of 3.5 %, which has brought the prime lending rate down to 7%, and indications are, looking at global and local markets, that the interest rates are going to be at these levels for the foreseeable future. This is the lowest our interest rates in South Africa has been since the 1950’s.

 

What does this mean to buyers & Investors:

For new home buyers wanting to climb onto the property ladder or investors looking to expand their portfolios, this could not be better time. This is the cheapest it has been in decades when taking into account the interest rate together with property prices.

This may well be a once in a lifetime “black swan event”, so for first time buyers or investors, it is definitely an opportunity to rewrite your future in wealth.

 

What does this mean in rands & cents?

If you had bought a property of R1 million prior to the cut, your repayment would have been R9485 per month. At the current rate, that same property will cost you R7753. This means a monthly saving of R1732 and over R400 000 over the 20 year period of your homeloan. You would also have had to earn R31 617 to qualify, where as now you only need to earn an income of R 25 843.

 

Will COVID not have a negative impact on my investment?

Coming out of the COVID epedemic will surely mean the economies of the world will rebound. Some quicker and more vigorously than others, but property remains the backbone of any economy. Although the South African market is expected to have a slower recovery due to the structural challenges that we had going into the lockdown, especially on the affordable accommodation side, as it is always in the highest demand.

 

Buying a unit at Stanley Park:

Stanley Park falls under the ‘affordable accommodation’ category with units below the R1,5 million mark & even if you need to upscale, downscale or re-locate – it will generate a Gross income yield of 9-10%, that is without taking into account the increase in property value over time adding to your return on investment. As sales in the complex has not been available to the public for very long,  you have a unique opportunity for early buy-in.

Units at Stanley Park come with additional benefits such as free appliances, low levies & reduced bond & transfer fees of only R19 000 – giving you savings close to R35 000 depending on your unit of choice.

 

What do I need to qualify?

The below table sets out the various unit options outlining the savings thanks to the interest rate cut as well as expected rental & income qualifying criteria. For more information, chat to our team or apply for a free, no obligation pre-approval certificate from our in-house finance team.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.