For many South Africans, owning a property has become more than a distant dream. Instead, it is fast becoming a viable option to swap the renting space for owning property. With the current economic pressure, especially during the COVID-19 pandemic, the Reserve Bank has reduced the repo rate by a total of 3% since the beginning of the year. A further reduction in interest rates was announced by the Reserve Bank on 23 July 2020 setting the repo rate at 3.5% and the prime lending rate at 7%. This has been the fifth rate cut for 2020. With interest rates the lowest it has been in 50 years, now might be the opportune time for first time home buyers to enter the property market.
The effect of the reduced interest rates is that the cost of servicing the monthly home loan repayments will in all probability be less compared to fixed rent that will likely remain unchanged.
The South African property sector is currently considered a buyer’s market. Buyers will be able to negotiate good prices due to the high supply of properties, whilst at the same time benefiting from reduced monthly home loan instalments. Moreover, by choosing to invest in property rather than renting, one can shape a credit record and build equity, which might be a worthwhile move, especially for those buyers whose financial position remains stable notwithstanding the current crisis.
The contents of this article represent the writers personal view and should not be relied on as financial advice.