The favourable property buying conditions have received another boost with the Reserve Bank’s Monetary Policy Committee decision to cut the prime interest rate by 25 basis points to 9.75% (repo rate to 6.5%).
The early January decision provides a positive platform for the year ahead and the bank hinted that a further rate cut may be on the cards during the first half of the year provided that inflation remains within the bank’s target range (of 3% to 6%) and the Rand holds steady.
After a challenging year, the expectation is that 2020 should be more positive for the economy. The positive effect and sentiment boost of a rate cut should not be underestimated. It provides some relief for consumer budgets and adds further to the favourable buying conditions in the property market.
Buyers will now find mortgage loans a little cheaper while bond approvals continue at unprecedented levels. Ooba for example reported an approval rate of 83% in December and faster bank turn-around times . The average deposit requirement remains in the 11% average range while first-time buyers are still able to qualify for higher loan-to-value bonds of up to 105% (including costs) in some instances.
The outlook for sellers though remains muted with FNB expecting only a mild uptick in prices to around 4% at best this year. Although sellers in the sub-R1.8m (R3m in some areas) are likely to continue seeing strong demand, above that buyers are likely to keep pressure on asking prices.