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Surviving the prime interest rate upcycle. How to buy a home you can afford in a challenging economic climate.

19 July 2022 | Insights Team


Date: Wednesday, 27 July 2022

Duration: 45 minutes

Watch our host, Louis Kruger, Managing Director at Kruger Attorneys & Conveyancers Incorporated and our Leadhome panel of real estate experts share valuable information, market insights and all the right answers to your property-related questions.


Host | Louis Kruger, MD, Kruger Attorneys & Conveyancers Incorporated
Leadhome Properties panellists (left to right) | Charles Smith, Team Lead & Real Estate Agent, Pretoria | Rosa Paulo, Co-Team Lead & Real Estate Agent, Centurion | Haley Clark, Real Estate Agent, South Coast, Durban | Warren Backman, Real Estate Agent, Midrand


As the realisation dawns that the era of historically low interest rates has concluded and a new, far less amicable cycle of rising interest rates and inflation beds down, we unpack what this means for many South Africans looking to purchase a home, and define how the changing affordability landscape will impact sellers hoping to snag that elusive buyer with deep pockets.

What is happening in the market?

With four consecutive rate hikes since November 2021 and the next bigger-than-expected rate hike of at least another 50 basis points imminent within a month, interest rates are rapidly reaching projected levels of around 10% by year-end 2022.

Home loans are becoming more expensive!

A year ago, a 20-year home loan of R1.5 million at a 7% prime rate equated to a monthly bond repayment of R11,629. At today’s 8.25% prime rate, this monthly repayment has increased to R12,781 an amount of R1,152 extra per month. At 10% the monthly repayment will escalate to R14,475, R2,846 more each month than the initial repayment enjoyed in July 2020. All in all, this is a sizeable chunk of change to swallow for many homeowners grappling with inflation. 

Conversely, buyers are affected too

Why? Because conversely, buyers can no longer afford to get as much bang for their buck as they could previously. Let’s unpack this. Assuming that a buyer can afford to pay a repayment of R11,629 per month on a 20-year bond. A year ago at a 7% prime rate, this amount would have been sufficient to purchase a property to the value of R1,5 million. However, now, at the prevailing 8.25% interest rate, the same R11,629 monthly repayment will purchase a home to a lesser value of R1,364,858. At 8.75% affordability is further reduced to a property value of R1,315,983.  At 10% it is R1,205,101, a whopping R300,000 less affordable than the R1.5 million property was a year ago. And so on.

Selling prices are coming down

With less affordability and therefore fewer buyers in the market, it follows that selling prices are coming down. This is already apparent. But as a seller, how far down should pricing be adjusted in order to remain competitive, while still achieving the best price for your property? Based on our expertise and data, we suggest you consult with your real estate agent to determine the recommended adjustment to move the property into a price bracket that will attract the most traction to negotiate. Then, the savvy seller can claw thousands back –  R40,000 on average per transaction –  by selling smarter and paying less in fees with Leadhome Properties’ unbeatable, market-leading low fixed fee value offering.

A partner you can trust

Leadhome Properties, SA’s No 1 low-fixed-fee estate agency knows that when it comes to high-value transactions such as real estate, buyers and sellers alike need a reliable partner they can trust through transparency and certainty. Leadhome Properties is and will always be your trusted partner when buying or selling property.

Book a valuation, Search properties or contact us:

Leadhome Properties: +27 (0)10 590 3088

Insights Team

We're the "thinking arm" of Leadhome, combining expertise in data analysis, modelling, sociology, geography, and philosophy to interrogate current trends in the South African residential property market. Proudly contemplative since 2015.

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