The second-best time to buy property is today

In the current property market, the best time to make your property purchase is yesterday. The second-best time? Today.

Since the end of July 2020, the South African Reserve Bank (SARB) has kept the national repo rate at 3.5% - with the prime lending rate remaining at 7% during this time. What does this mean for buyers?

Firstly, a low lending rate means that minimum repayments on bonds are lower because the interest accumulated on these bonds are kept low. This is excellent news for all people looking to buy property, and even more so for those with good credit scores who can take advantage of the lowest interest rates on offer.

Secondly, the lower interest rates have led to a boom in the property market - with much more accessibility and affordability for first-time buyers who may not previously have been able to think of owning their own home. Experts suggest that this boom may continue for at least another year.

To illustrate these points, consider two scenarios:
 

Person A purchases a property of R1 500 000 on the 1st of May 2019 and registers a bond at the prime lending rate of 10.5% (at that time), over 20 years after placing down a R200 000 deposit. Assuming the interest rate had remained the same over the 20 years, the total cost of the loan would have been R3 131 505.25, with a monthly repayment of around R13 000 for the duration of the loan.

Person B purchases a property of R1 500 000 on the 1st of August 2020 and registers a bond at the prime lending rate of 7%, over 20 years after paying the same deposit as Person A. Assuming the interest rate remains the same over the 20 years, the total cost of the loan would be R2 435 492.68, with a monthly repayment of around R10 150 over the loan period.

Person B thus saves almost R700 000 over the 20-year period at the lower interest rate and almost R3 000 per month on the repayment. Of course, the person in the second scenario enjoys ideal circumstances and it cannot be expected that the lending rate stays at its historic low for 20 years.

But for those who can afford a property purchase right now and foresee themselves being able to adjust to a growing economy that will see the prime lending rate rise slowly but surely, it might just be a golden opportunity - ensuring the most astute purchase of their lifetime with great financial benefits in the long run.

Imagine, for instance, saving R700 000 over the course of 20 years for retirement - that's a kind of financial security that many people can only dream of. Making the right decision now could very easily change your life for the better - for good. You don't have yesterday anymore, but you do have today.

Choose a property partner that stands by your side and provides you with all the expertise and legal knowledge you need to make your next purchase simple and rewarding. Choose 3%.Com Properties. 3%.Com Properties - We know Property and the Law®

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)