Why it is the best time to buy property?
Category News: Economy
Why it is the best time to buy property?
Currently the most frequent asked question is, is it the right time to buy property?
With the interest rate been the lowest in decades and property price struggling to keep up with inflation it is now a buyers' market.
Factors that have contributed to this unexpected turn of events include -
- Pent-up demand: Although it was only expected to come into play later in the year, the pent-up demand during the lockdown has been unleashed sooner than expected, with prospective home buyers seemingly rushing out of the gates to purchase new homes.
- Work-from-home world: The way of work in a world beset by pandemic has caused many people to reassess their home life. The demand for larger homes is believed to have its roots in the desire for a more comfortable working environment, as more people are forced to work from home.
- The role of the 2020 interest rate cuts
- Another positive development that has contributed to resurgent demand are the interest rate cuts that kicked off the first half of 2020.
- In response to the coronavirus, and the damage it was expected to have on the economy, the South African Reserve Bank (SARB) cut the rate by a further 1% on 14 April 2020, after already having cut it by the same amount earlier in March. It was then cut again by 0,5% in May and it was further cut by 0.5% in July. This means five rate cuts within the space of seven months, taking the prime rate to 7%, the lowest level in over 50 years.
- So, on a bond of, say, R1 000 000, the repayment amount will have dropped from R9 650 at the beginning of January to R7 753 after the rate cut in July 2020.
- The lower mortgage rates have naturally created an environment for property investment, with prospective home buyers looking to seize the opportunity before mortgage rates rise again.
FNB's House Price Index (HPI) adjusted for inflation, compared to property value growth
Author: Apartmentbox
