Western Cape Business News

Send  Share  RSS  Twitter  22 Oct 2014

PROPERTY: Home Buyers Advised to Factor in Interest Rate Increases


Recent Western Cape Business News

Home buyers need to factor in a possible medium term interest rate rise of up to 3% when they’re house-hunting, and not consider properties that are at the upper limit off what they can currently afford.

So says Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, who remarked after the latest announcement of an unchanged 5% repo rate for the 7th Monetary Policy Committee meeting in a row, that the lending rate was unlikely to remain as low next year.

The Reserve Bank’s repo rate is the lowest in 30 years. The decision not to increase the repo rate means the prime lending rate remains unchanged at 8.5%.

Geffen says there’s less movement in the real estate market than there should be in the current economic environment, because sellers are waiting for prices to rise and they’re concerned about finding new homes when there is such as shortage of properties on the market.

“From the top to the bottom end of the market there’s an artificial shortage of sale stock. It’s a Catch 22, because the longer sellers hold on for more stock to enter the market, the less stock there is to sell.

“My advice to sellers – especially those upgrading – is not to postpone, because we’re likely to see an 8% to 10% per year increase in real estate prices over the next three to five years and we will see the prime lending rate go up.”

Geffen says there’s a simple solution for sellers concerned about the stock shortage.

“It’s dead easy; work a six-month occupational rent period into the sales agreement. That gives sellers enough time to find the new homes they seek and removes the current bottleneck that we’re finding everywhere in SA.”

Currently the national average sale price for properties sold by Lew Geffen Sotheby’s International Realty is R2.1 million.

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