INTEREST RATE HIKE: IS IT STILL A GOOD TIME TO INVEST IN PROPERTY?
Category Property Ownership
The announcement of the third consecutive repo rate hike sent shockwaves through many homeowners and consumers alike, especially as it comes on the eve of the Festive Season. Higher bond and debt instalments have a significant impact on one's monthly budget. It is just natural to start wondering if buying a property Is such a good idea after all.
Rhys Dyer, CEO of ooba, says that several factors indicate that it's still a good time to invest in property:
- "The revised interest rate is still one of the best experienced over the past 25 years.
- High interest rates slow new demand for property which results in lower property prices, meaning that it's still a buyer's market.
- Banks continue to compete for the home loan business by approving home loans on attractive terms.
- Property prices remain affordable across many parts of the country."
This is the time in the market cycle when investors emerge fuelling the demand for buy-to-let properties. As demand starts dropping off due to high interest rates, so do house prices, and the ardent investor knows that 'now is the time'. The demand for rental accommodation grows in an environment where interest rates are on the rise as affordability is affected.
Buying property is a long-term investment and when doing so, one must take a long-term view. Firstly, one must understand that a profit will mostly not be yielded when selling within two or three years of purchasing a property. Secondly, put down a deposit to lower the bond amount and hence your monthly payments. Thirdly, always calculate how an increased monthly repayment will affect you in case of a possible increase in the interest rate and decide if you would be able to handle the situation comfortably.
The long-term historical interest rate over the past 25 years was around 12% on average, with the lowest being 7% in recent years, so we have been spoilt just a little and feel hard done by the latest increases. Let's rather be prepared for another upcoming increase or two, cut expenses, and curb spending.
The property market will forever go through ups and downs, but put on your raincoat, be prepared, and weather the storms, because investing in property remains the best decision you can make.
Author: Adrie Barnard
