Interest rates and effect on property sales


The current low interest rates in South African has influenced many markets, both positively and negatively. But how has it influenced the real estate market and why does it carry so much weight?

South Africa`s Reserve Bank left the repo rate unchanged at 5% which gives a prime interest rate of 8,5%. This has lead to banks urging home owners to take advantage of the low interest rates to accelerate their debt payments.  For investors and potential homeowners, this has left the market wide open for them. The low interest rates have created a slight increase in the sales of property as investors look to take full advantage of the current situation.

Engel & Völkers Southern Africa asked some of their shops on how these interest rates have influenced the sales in their respected areas.

“We believe that the low interest rates have had a positive effect as we have seen more movement in the market over the last 3 months. Bloemfontein has a great investor market as a lot of investors see the gap in the market due to a shortage of student housing. Traditionally investors in student housing will purchase towards the end of the year with the new years’ intake of students in mind,” says Engel & Völkers Bloemfontein

Coastal areas have also seen some changes in the market. According to Engel & Völkers Umhlanga the low interest rates have had a positive effect on the area. They say that the greater Umhlanga market has picked up and that they have seen a great deal of movement of late. “Umhlanga has a lot of commercial investors, with hotels being one of the highest in demand. We have noticed that there are a lot more buyers from Johannesburg who are showing interest in Umhlanga’s property market,” Engel & Völkers Umhlanga concluded.

“Bryanston has definitely seen an increase in activities with the continued low interest rates and what should be low interest rates into the foreseeable future. Potential house buyers are also far more educated on what the bank requirements are for financing and have ensured over the last few years that they have put themselves in a position to meet these requirements, specifically with regards deposits to be put down on potential property transactions. There is also a strong demand for Corporate rentals in the greater Bryanston area because of its location to the Sandton commercial node which has attracted investors of late”, Bryanston Engel & Völkers concluded.

Overall Engel & Völkers has seen an increase in the market which indicates a steady growth in coming years for the property market due to the low interest rates. “Household debt is still a problem even though it has decreased slightly of late. The fact that South Africans are willing to pay most of their income to debt such as personal loans, is a worrying fact. When investing in property you will benefit from your investment where as personal loans is money lost. But we have seen that South Africans have been more cautious of late when it comes to disposable  income, which is a good sign of things to come,” says Craig Hutchison CEO of Engel & Völkers Southern Africa.




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