S.Africa’s changing property market landscape - CNBC Africa

S.Africa’s changing property market landscape

Southern Africa

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A house perched on a hand. PHOTO: Getty Images

“We’ve seen interest rates remaining relatively flat over the past year or two years, and we’ve seen that rates were not moved in any direction since June to July 2012. Earlier this year, we’ve seen the first rate hike,” Jacques du Toit, property analyst at Absa Home Loans, told CNBC Africa.

“Obviously that has an impact in terms of perceptions, not that that 50 basis points will make a massive financial impact in terms of repaying debt and repaying a mortgage loan. It gives an indication of what we can expect in terms of other interest rate movements during the course of this year.”

Du Toit added that there are however forecasts of increased interest rates this year by another 100 basis points, with the prime lending rate then sitting at 10 per cent.

It is the accumulative effect of the growing interest rate will dstart to play a role in the consumer’s plans to purchase property.


“If interest rates are increasing over time by 150 or 200 basis points, then it really becomes an issue for your consumer and your home owner, and also your prospective home owner. That will also start to impact decisions in terms of buying property moving forward,” Du Toit explained.

(READ MORE: Trying times for S.Africa's commercial property industry)

Retha Schutte, Pretoria regional executive for Pam Golding Properties added that although prices are under pressure, there have been property price increases as demand to purchase property continues to grow.

“We’ve got able buyers that are competing [in our property market], and that is driving it up in certain areas. We’re certainly seeing that properties in a certain price rage – and we’re talking about the 800,000 to two million – is obviously the price range where affordability at this point is sitting, and where everybody obviously wants to get the best possible buy,” she said.

“So if you are located in that sort of price bracket or in the area that’s got a security component to it, it certainly does make the demand higher.”

(READ MORE: S.Africa's luxury property attracting foreign investment)

Du Toit explained that with the National Credit Act, it comes down to responsible lending but also responsible borrowing from the consumer’s perspective. While 100 per cent mortgage loan products are still available, it is nonetheless under strict moderation.

He added that prospective buyers tended to ignore additional charges such levies and transfer costs when purchasing property.

“When it comes to the transfer costs, and those costs in terms of getting the property registered in your name, many consumers tend to forget about those, and they only stumble upon those right at the end of the transaction,” said Du Toit.

“A factor such as the running costs – your electricity costs, property rates and taxes, water taxes – we’ve seen massive increases in those costs over time.”