The pandemic which has affected so many sectors of the economy has lasted far longer than expected, but so too has the housing market’s rebound; fuelled by record-low interest rates and a shift in homeownership behaviour.
First-home buyers particularly made the most of improved affordability and lower bond repayments, accounting for 70% ofFNB says the second surge witnessed during the first quarter of this year has been driven by repeat buyers with changing buying needs. There has been a shift in homeownership as more people are able to work from home, instead of an office.
Many of these repeat buyers apply for higher bonds, with a lower loan-to-value ratio. While much of last year’s buyer activity was at the lower end of the market,recent application data suggests that buyers in the middle to upper price segments are seeing the value of applying for a bond when the interest rate is so favourable.
We believe that the record-low interest rates, as well as the forecast that they will remain well below 10% for a good few months yet, bodes well for the property market. House prices, always a good indicator of the state of the market, look set to increase by an average of almost 3% over the next six months, says the SARB Repo Rate Forecast. The latest Lightstone report puts the annual house price inflation, as of May 2021, at 4.9%, with price growth increasing across all provinces.
But, even if the repo rate does increase nominally this month or even by the end of the year, the prime lending rate will still be well below the 10% it was in January last year, before the start of the pandemic. The pace at which the economy will recover hinges on many factors, including the pace of the vaccine rollout. But, for now, all indications point to sustained favourable lending conditions that augur well for the housing market.