Another rate cut puts the spotlight on property investment

Yet another repo rate cut was announced on 23 July 2020, bringing South Africa's repo rate to a historic 3.5%, and the corresponding prime lending rate to 7%. This fifth repo rate cut for 2020 means that there has never been a better time to consider buying your own home or making further investments in the property market. For those with a secure monthly income and a clear idea as to which area they would like to invest in, the current property-buying conditions in South Africa are the best that they have been in decades. The time to buy is now.

So, just how much could you save on a 2020 property purchase?

According to Herschel Jawitz, CEO of Jawitz Properties, the cumulative impact of this year's interest rates have slashed homeowners' monthly payments by almost 20%. To crunch the numbers in this regard, consider the example of a family who has a R1 000 000 bond on a property, at an interest rate of 9.75%. 

In January 2020, they would have been paying a monthly instalment of R9 485, assuming an interest rate of 9.75%. The repo rate cut that came on 19 March would have pushed this payment down to R8 837. The next repo rate cut, which came on 14 April, would have seen this repayment shaved down to R8 209. Further good news came our way on 21 May, and this home loan repayment would have reduced to R7 904. As of 23 July, that payment is down to R7 752 per month - amounting to a cumulative reduction of R1 733.

When one puts these numbers into a long-term perspective, they become even more staggering. Over the 20-year duration of a bond, the reduced interest rate could save that family R416 000. If the family chose to continue paying their bond at the original rate, they could slash as much as six years off the duration of their home loan.

In the higher price brackets, consider a family who purchased a home for R5 000 000. While their home loan repayment back in January would have been R47 426, they will now be paying R38 764 - with a whopping monthly saving of R8 662.

Home loan applications from first-time buyers on the rise

As of June 2020, when South Africa's lockdown restrictions began to be lifted, bond originator ooba has reported a climb in the number of home loan applications they are receiving from those wishing to buy their first home. There has been a 45% increase in buyer activity since level three lockdown began. In light of the latest repo rate cut, this number is set to increase even further. Thanks to the lower interest rate and favourable conditions, homeownership is now within the reach of a greater number of South Africans than ever before. The majority of market activity is taking place in the R750 000 to R2 000 000 price bracket, with a focus on homes for young couples and families.

Property is an investment that has proven itself to last the test of time. In these uncertain times, it continues to be a solid investment choice. It is also well worth noting that an instalment on a home loan can actually be more affordable than a monthly rent payment in certain situations. Jawitz Properties has a wide array of properties for sale across South Africa. Contact one of our #RealAgents today and let us help you turn 2020 into the year that you invest in property.