“The holding of the current interest rate at 7% by the South African Reserve Bank brings relief to the real estate industry, and allows potential buyers and current bond holders to plan with more certainty over the next few months,” says Mike Greeff, CEO of Greeff Christie’s International Real Estates.
“The lower than expected inflation rate (5.3%) could leave room for a welcome rate cut by year end.”
Affordability is currently an issue, particularly from the younger would-be first-time purchasers, who are struggling to enter the real estate market, explains Greeff. For this sector specifically, a stable interest rate is vital.
He notes that while there has been a slight lower house price growth in some areas of the Cape Peninsula, continued strong demand ensures that the region is still outpacing the rest of the country, with year-on-year increases in the average house price growth rate sitting in double digits.
“It was pegged at 14.1% according to FNB City of Cape Town House Price Indices, for the first quarter of 2017,” says Greeff.
The slight slowing down of the growth in Peninsula prices is a reflection of a national trend and also possibly a statement from the market regarding the increasing cost of living. However, there are pockets of exceptional growth in the higher-end regions, particularly on the Atlantic Seaboard, where a year-on-year house-price growth of 33.9 % has been recorded, while prices in the City Bowl grew by 20.9%.
Propstats statistics reveal a strong trend indicating that coastal areas attract more cash buyers; The Atlantic Seaboard is a cash strong sector, with 74% of purchases concluded in cash and 26% being bond dependent.
“The free-standing homes market in False Bay is also cash strong with 62% cash and 38% bond, followed by Hout Bay 58% cash and 42% bond,” says Greeff. “The sectional title market in the southern suburbs is also cash dominant with 60% of transactions being cash and 40% bonded”.
“Many of these purchasers are investors who buy to rent out,” explains Greeff. “A cash-strong sector remains immune to the ups and downs in the interest rate,” says Greeff, adding that other sources of cash are foreign buyers or the wealthy from upcountry.
Other sub regions on the Peninsula are defined by a mix of cash and financed transactions to a varying degree – the most bond dependent being the south eastern suburbs where 69% of purchases of freestanding properties are financed and only 31% are cash.