On 21 November 2024, the Monetary Policy Committee will deliver their decision regarding the interest rate. With South Africa's inflation easing and global central banks cautiously beginning rate cuts, the overall sentiment is that there is likely to be a further cut of around 0.25%.
The SARB's Monetary Policy Committee in September unanimously decided to reduce the policy rate by 25 basis points to 8% per annum, resulting in a new prime rate of 11.50%.
Governor of the South African Reserve Bank, Lesetja Kganyago said at the time of the announcement that in discussing the stance, MPC members considered an unchanged stance, a 25-basis point cut, and a 50-basis point cut. "The MPC ultimately reached consensus on 25 basis points, agreeing that a less restrictive stance was consistent with sustainably lower inflation over the medium term".
READ: Experts react to SARB's 0.25% interest rate cut and its impact
A further cut would be most welcomed, but consumers are cautioned not to expect interest rates to dramatically lower within the near future. As promising as the inflation numbers look now, the long-term outlook remains uncertain and the repo rate is largely predicted to stay above pre-pandemic levels of around 6-7% through 2025.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that while we cannot be certain how far interest rates will drop, homeowners and buyers should remain cautious but optimistic.
“A further rate decrease will undoubtedly offer greater temporary relief, but the property market's recovery is likely to be slow and will depend on broader economic conditions and consumer confidence. Buyers and sellers will need to weigh up both the opportunities that exist within the current market as well as their long-term financial plans to decide how best to proceed given the current market,” Goslett recommends.
As real estate agents anxiously await the November interest rate decision, Goslett’s advice is to focus on proactive communication with clients. “If rates drop, it could lead to increased buyer activity, so agents should be ready to guide buyers through the home loan process. However, if rates remain steady, helping clients understand the long-term benefits of buying now – before property prices potentially rise further – will be key. Flexibility, market knowledge, and maintaining client confidence will be crucial in either case,” he states.
For buyers, patience and preparation are key. Goslett explains that if interest rates drop further in November, it may create opportunities for lower monthly bond repayments. However, even if rates stay the same, it's still wise to act, as property prices will continue rising regardless.
“The best time to buy or sell a home is when you're financially ready, regardless of market conditions. Timing the market perfectly is difficult, but owning property remains one of the most reliable ways to build long-term wealth. While potential interest rate cuts may benefit buyers and sellers in the short term, ultimately, real estate is a long-term investment, and waiting too long could mean missing out on current opportunities,” he concludes.
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Homeowners: How the interest rate cut affects your financial planning:
To help you navigate this change, Property24 has introduced an Additional Once-Off Payment feature in the additional payments calculator tool, allowing you to understand how the rate cut can benefit your financial circumstances.
To access this feature, simply navigate to the Property24 Additional Payments Calculator under the Calculators tab.
This additional feature is designed to help you estimate the financial impact of the rate change on your existing bond. By entering your current bond debt amount, current bond repayment, additional monthly payment, once-off payment, and interest rate details, you can assess how your payments and overall costs are affected.
Click here to access the Additional Once-Off Payment feature.
READ: How to capitalise on the latest interest rate cut
“Buying a home is a significant life step and major financial commitment and rushing into buying a property can lead to costly regrets and dissatisfaction down the line,” says Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg. (Read full article here)
“The key to a successful and fulfilling home-buying experience lies in patience, careful consideration of numerous factors and thinking long-term rather than only fulfilling immediate needs.”
Odendaal says that the following mistakes and omissions can easily lead to regret purchases and unwise investments:
Failing to Define Your Priorities:
One of the most significant mistakes when purchasing a property is failing to clearly define your priorities. It's vital to have a clear understanding of your needs, desires, and deal-breakers before embarking on your home search.
Consider factors such as location, size, layout, amenities, and proximity to work and schools. Create a list of non-negotiables and use it as a guiding compass throughout your property search.
Skipping the Research Phase:
One of the most prevalent errors when seeking a new property is neglecting thorough research and impulsive decisions can lead to mistakes such as selecting a location that doesn't align with your lifestyle or needs.
Prior to committing to a property, take the time to research the neighbourhood, its amenities, proximity to work, schools, and other essential facilities. Visit the area at different times of the day to get a comprehensive understanding of the environment.
Online resources, local forums, and community websites can also provide invaluable insights and help you make an informed decision.
Neglecting Proper Budgeting:
It's crucial to establish a realistic budget that encompasses not only the property price but also additional and future costs such as taxes, insurance, maintenance and potential renovations.
A comprehensive budget ensures that you can comfortably afford the property without compromising your financial stability.
Overlooking Future Growth and Needs:
Consider your future plans and potential life changes when purchasing a property. While the current layout may suit your needs, will it accommodate potential family expansions or lifestyle shifts?
Opting for a property that aligns with your long-term goals can save you from the hassle and costs of relocating sooner than you had planned.
Skipping Home Inspections:
Foregoing a comprehensive home inspection can be a grave error, especially when buying an older home. Hidden issues, such as structural problems, plumbing or electrical concerns, and potential pests, can lead to substantial expenses post-purchase.
Engage a qualified home inspector to thoroughly assess the property's condition, allowing you to make an informed decision based on accurate information.
Succumbing to Emotional Impulses:
Emotions can cloud judgment, especially when purchasing a property. Falling in love with a property's aesthetics without considering practicality and functionality can lead to disappointment in the long run.
Maintain a rational mindset and critically evaluate the property against your predefined criteria.
Overlooking the Fine Print:
Whether you're signing a lease or purchasing a property, reading and comprehending the contract is crucial because ignoring the fine print can lead to unpleasant surprises later on.
Ensure you understand the terms, conditions, and obligations associated with the property. If needed, seek legal advice to clarify any ambiguities or potential pitfalls within the agreement.
Succumbing to Market Pressure:
In competitive real estate markets, it's easy to succumb to pressure and rush into a decision, especially if you know that there are other buyers interested in the same property.
While it's natural to feel a sense of urgency, it's crucial to remain patient and not settle for a property that doesn't meet your requirements. Take your time, explore multiple options, and don't let market dynamics dictate your choices.
Disregarding Resale Value:
Life is full of surprises, and circumstances may change, necessitating a property sale. Neglecting to assess the property's potential resale value and marketability can leave you trapped in a less-than-ideal situation if you need to sell. Research the property's history, growth trends in the area, and potential for appreciation.
Not Seeking Professional Guidance:
Navigating the complexities of the real estate market can be overwhelming and engaging an experienced real estate agent, financial advisor and legal expert can provide invaluable guidance throughout the process. Professionals can offer insights, negotiate on your behalf, and ensure that your interests are protected.
“The path to a successful property purchase is paved with thoughtful consideration and deliberate steps,” says Odendaal.
Avoid the allure of rushing into a decision and take the time to define your priorities, set a realistic budget and thoroughly research the property and its surroundings.
“Remember that a property is not just a purchase; it's an investment in your future and the place in which you raise your family and escape from the hustle and bustle.”
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