Looming rate cut another sign that it’s time to buy property
Now may just be the right time to buy property, says Samuel Seeff. Nobody rings a bell and announces that the market has hit the bottom, and that it is now a good time to buy, but he says the signs are pointing in that direction.
The news that inflation has dipped to 4.6% (from 5.1% in June) to the lowest level since mid-2021 provides ample incentive for rate cuts is a good reason to be positive, he says it goes much deeper than that.
The GNU (Government of National Unity) appears to be heading towards a point where it can really provide what is required and needed to move the economy forward. There is an air of positivity. We see younger cabinet ministers and deputies eager to bring change, and the potential that the country can return to a path of growth.
The lack of loadshedding gives further encouragement that things can be fixed, and that better times are ahead. A stable energy supply will increase GDP growth which is needed to create more jobs and wealth, and boost demand for property.
We are beginning to see this translate into positive sentiment, and Seeff says the property market runs on positive sentiment. People will not invest in property which is a long-term commitment with a pay-back of around twenty years if they do not believe in the future. For the first time in many years, there is a sense that the outlook for the country is brighter.
When you combine that with the outlook of a declining interest rate, it is an added confidence boost to invest in property. He says nobody wants to buy in an environment where the interest rate is on the up because you are not sure where it can land up. However, if you can afford to purchase property at the current rate of 11.75%, and the rate appears to be heading into a downward cycle, then you can buy with confidence.
As a further incentive, most parts of the country have not really seen much capital appreciation for about 5-7 years now, even at the top end of the market. That means that if you are buying now, you are buying more or less at the same price levels as then. At some stage property values will grow again, and you can benefit from the appreciation in value.
Seeff says we have a unique opportunity right now to say that conditions are great for buyers. The banks are still ready to lend. Deposit requirements are still at a decade-long low, and qualifying buyers can still secure a rate concession. Historical data shows that those who bought before a boom cycle have benefited significantly from capital value appreciation, and buyers who hesitate and wait until the market is on the up may end up paying a higher price.
To work out how much a buyer can truly afford, RE/MAX of Southern Africa shares the following tips:
- Calculate your debt-to-income ratio to see how much of your income is already committed to debt payments. The money leftover is now your base amount to work out how much you want to pay on a home loan.
- Top tip: are there any debts you could pay off quickly to free up more income?
- Work out how much money you typically spend on lifestyle expenses (consider things like birthday presents, entertainment costs, hair and beauty expenses, etc.) These amounts vary each month, which is why it can be tricky to work out a budget for these items.
- Consider your priorities. For example, if travelling is important to you, then it might bring you more joy to compromise on the size of your home than to compromise on your ability to afford getaways.
- If all else fails and you’re not sure where to start, a common guideline is that your monthly housing costs should not exceed 28% of your gross monthly income, and your total debt payments (including housing costs) should not exceed 36% of your gross monthly income.
Original Article: https://www.property24.com/articles/looming-rate-cut-another-sign-that-its-time-to-buy-property/32344
