SIMON BROWN: I’m chatting with Alan Rubin, chief operating officer at ooba. Alan, I appreciate the time today. Last week our MPC raised rates another half a percent [to] 11.75% for prime, taking it to the highest in 14 years, which puts consumers under massive strain. The one number floating around [is that] a million rand bond is costing you probably R3 400 more than it did just 18 months ago.
SIMON BROWN: Yes, I was saying maybe we’d get to 10%, maybe 10.25% in a quarter; I was horribly wrong on that. Are home prices stabilising or are they actually falling? I suspect that this is going to be regional, particularly [on] the Atlantic Seaboard and with the semigration we’ve seen. But are we actually seeing decreases, or are prices kind of holding?
And so the starkest indicator of that is that our buy-to-let, the people, the investors who are showing confidence, that part of the market is up to 25% within the Western Cape. So one in four transactions is a buy-to-let transaction, whereas nationally the number is closer to 8%. So there’s a significant difference between what you’re seeing in terms of sentiment in the Western Cape versus around the rest of the country.
ALAN RUBIN: Yes. There are a couple of elements in that. Certainly if you are looking, – and we started off with the discussion about the higher interest costs – there are two factors that are going influence how much interest you pay. The one is the interest rate and the other is how much you borrow. How much you borrow is going to be impacted by what the purchase prices are of houses. So this could potentially be a good time to buy in the sense that real house prices are lower.
And if we are pretty close to the top of the cycle, if you can afford it now and continue to pay that instalment over, say, the next five years when interest rates start to come down, you’ll pay down your home loan probably pretty quickly and you might look back at this moment as having been one of the sort of ‘darkest before dawn’ moments, But none of us have crystal balls.
ALAN RUBIN: So there’s absolutely no question that the banks are continuing to compete for home buyers and for home loans. So from that perspective as a home buyer, the banks are definitely going to compete for your business and you’re probably going to get an attractive interest rate. If we take interest rates now versus, say, a year ago, the discount to prime a year ago was prime less a quarter of a percent.