Interest Rates Represent Double-Edged Sword for Property Market
Increased interest rates are a necessary evil to mitigate runaway inflation, but the immediate effect on consumers could leave the property market dearth. That’s the news from Park Village Auctions’ Clive Lazarus, who anticipates a depression in the housing market.
“While we understand the necessity of the hike to curb a potentially disastrous inflation rate, the short-term results are hard to swallow,” says Clive. He continues, “Homeowners—who are already desperately thinly spread—could be sent over the edge.”
Clive, “It’s no secret that a well-functioning housing sector is critical to the overall health of the economy, but for the time being, we will probably see a large portion of the market reduce and even liquidate their investments.
“We are in a perfect storm between lower household disposable income, higher food prices, the threatening electricity tariff increase, the effects of loadshedding, and struggles to service existing debt.
“With the repo rate now at 6.25%, homeowners may have to renegotiate terms of their bonds to keep afloat. We may likely see an increase in auction property stock and distressed sales—and therein lies the irony of the recent hike.”
That being said, all is not doom and gloom. Clive is optimistic that “things will settle” and offers some insight to property investors.
Clive advises that those in a position to invest in the upcoming months should consider buy-to-let properties as the rental market typically surges under these conditions.
“As ever, location will remain the cornerstone for a good buy. Pinched consumers will undoubtedly look for homes closer to CBDs for job opportunities and lower fuel expenses,” adds Clive.
PVA is set to host several property auctions in October, namely a three-bedroom sectional title townhouse in Lonehill, Gauteng, on the 11th; a 985 square meters residential home (incomplete) in Polokwane on the 17th; and a vacant stand for development in Mmabatho, North West province on the 24th. The details for all of which can be found on PVA’s website at www.parkvillageauctions.co.za
