What a rate increase could mean for SA property

Although the decision by the SA Reserve Bank in May to maintain the repo rate at 5,5% was a welcome reprieve for the property market, continued sluggish economic growth and creeping inflation made a rate hike towards the third or fourth quarter of this year “probably unavoidable”. This is according to Seeff chairman, Samuel Seeff. Nevertheless, a rate hike would be unlikely to seriously damage the current buoyancy in buyer activity, which is being driven largely by demand that has been building over the last few years. However, it will put the affordable, sub-R1,5m, market segment under pressure.

This was because, while overall household debt has been coming down, a rate hike would most certainly see home loan affordability take a knock, Seeff said, as would the ability of consumers to service their monthly debt, including their bond repayments. The knock-on effect on the basic cost of living with increases in the prices of especially food and transport would put further pressure on household budgets that were already burdened. But, despite this, Seeff believes that several signs (see article below) indicated that this should be a good year for South African property, although stock shortages remained a challenge.