Can You Still Afford to Buy a Home in 2016?

The 0.5% increase in the repo rate recently announced by the South African Reserve Bank’s Monetary Policy Committee was expected by almost everyone in the residential real estate sector, and was absolutely inevitable.

Smyth says at current prices, South African residential property is still eminently affordable for those who are able to qualify for a bond - and there are still people ‘out there’ whose earnings and income levels do, in fact, make them acceptable to the banks for this type of loan, but who do not as yet realise this.

This is according to John Smyth, CEO of the Johannesburg-headquartered bond originators Multi NET, who says further rate hikes can be expected in 2016.

“With South Africa’s currency showing an unprecedented weakness, the cost of living rising, inflation set on an upward trajectory - and likely to continue in this way - and with so many South African families still apparently unable to keep their spending within a reasonable budget, we can, I believe, predict that by the end of this year that not only will the rate have risen by a full 1% or more, but also that the banks are likely to tighten up on their loan criteria,” says Smyth.

“The government, in theory, remains committed to the principle of homeownership, but the sad truth is that over 70% of our people will not in the foreseeable future be able to afford their own homes without some form of government assistance.”

For those who do own properties which they can rent out, he says the big consolation of the current situation is that, under the circumstances, their returns will continue to rise and the value of their properties will continue to increase.

Smyth says at current prices, South African residential property is still eminently affordable for those who are able to qualify for a bond - and there are still people ‘out there’ whose earnings and income levels do, in fact, make them acceptable to the banks for this type of loan, but who do not as yet realise this.

“As always, the best advice that a conscientious bond originator can give to those dreaming of owning a home someday, but unsure whether they qualify, is to consult a bond originator,” says Smyth.

“We are capable of steering the applicant towards a position in which he or she does qualify for a bond. This is sometimes easier to achieve than many people realise.”