As well as freeing up some equity for property owners, the low interest rate of 7% has also served to create a new generation of property buyers. Lending rates are low, banks are competing to offer the best bond terms possible and interest on your home loan. It is unlikely that we will see such low interest rates for a long time, and with the barriers to ownership being eased, now is the best time to get a foot on to the property ladder.
What will your bond cost?
By doing a bond repayment comparison from January to August this year, you are able to see how much less you will pay on your home loan if you purchase property now. Your cumulative savings on a R 2 million home are almost as much as R 3500.
| 2020 | INTEREST RATE | MONTHLY BOND REPAYMENT |
| January | 9.75% | R18 970 |
| March | 8.75% | R17 674 |
| April | 7.75% | R16 419 |
| May | 7.25% | R15 808 |
| August | 7% | R15 506 |
Should you opt for a fixed interest rate on a bond?
All signs indicate that the interest rate will stay stable for the next 2 -3 years so if you are going to take out a home loan, this is also the best time to opt for a fixed interest rate on your bond. Although the interest rate is at 7%, if you opt for a fixed interest rate the bank will likely offer you a slightly higher rate than prime (7%) to ensure they are covered for any further interest rate fluctuations over the next few years. This is the way banks ‘price in’ losses that may occur due to the interest rate dropping further. It is also important to note that the interest rate on your home loan does not remain fixed for the life of the bond, but instead will remain fixed for the first few years of the bond. The wisest move is to use the extra proceeds that come from the bond savings of the first few years to service the capital loan amount on your bond. If you have a look at how a home loan works, you will notice that the repayments of the first few years serve to pay the interest of the bond. In order to shorten the term of the bond and to reduce your monthly payments, it is best practice to pay an extra 10% towards your bond each month.
What should you buy?
We are currently in a buyer’s market which means that you are in the best position to negotiate with both the seller and the bank on the purchase of your property. At the moment banks are competing against each other to secure business from you, which gives you the added advantage of being able to shop around for the most suitable offer on a home loan. In the South African market, free standing home prices are dropping which means their value is decreasing as well. Although this may seem an attractive purchase option, it is not favourable when it comes time for you to sell, as the property would have depreciated in value even more.
Where should you buy?
At the moment, a home within a secure residential estate is proving the best buy. For example, homes within Sibaya Coastal Precinct have appreciated by an average of 40% over the last few years. Before you buy, there are other factors to consider which will help to secure future value on your property. Always look to buy from a reputable developer who has a good history of delivering on what they promise and within the proposed time frame. Devmco Group have successfully developed, launched and virtually sold out a number of its residential developments within the Sibaya Coastal Precinct. This is evidence that, we as developers, are catering to the needs of the market and securing future value by developing in a strategic location like the Sibaya Coastal Precinct.
How much do Sibaya Coastal Precinct properties cost?
As a precinct, which spans over 1000 hectares, the Sibaya Coastal Precinct will eventually encompass a range of home types across a range of price points. From architectural freestanding homes within estates like Gold Coast Estate to pet-friendly retirement homes priced between R2 million to R4 million, Sibaya will attract a breadth of buyers.
With the interest rate the lowest it has been in almost 50 years, along with a range of property prices within Sibaya, there has never been a better time to become a property owner.