Rate hikes unlikely to weigh on buying a home in South Africa in 2022, says FNB

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Key trends for 2022 include continued out-migration, minimal rental growth, club living and a continued focus on security.

Rising interest rates are unlikely to affect home buying in South Africa this year, according to First National Bank of FirstRand Ltd.

The lender expects the central bank to raise its benchmark rate by at least 75 basis points in 2022 due to rising inflationary pressures and plans by advanced economies, including the United States, to increase borrowing costs.

While higher rates may have a “chilling effect” on market transactions and price growth, the current wave of buying is largely driven by wealthier buyers who are less interest rate sensitive. , FNB economist Siphamandla Mkhwanazi said in a note.

Total mortgage advances stood at 1.63 trillion rand in the nine months to September, compared to 1.56 trillion rand in 2020, according to central bank data.

Historically low borrowing costs, coupled with falling average house prices at the start of the coronavirus pandemic “encouraged greater interest in mortgage borrowing”, the central bank said in its semi-annual review of monetary policy. in October.

“Anecdotal evidence and high vacancy rates suggest favorable conditions have allowed some tenants to become homeowners.”

In the medium term, a slow recovery in the labor market of an economy where more than a third of the labor force is unemployed and rising interest rates suggest a less favorable environment for purchasing activity, a said Mkhwanazi.

-With the help of Adelaide Changole.

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