Real Estate Investor Magazine South Africa June 2013 | Page 34

ACQUIRING

BY ANGELIQUE REDMOND

Is Now The Right
Time To Buy? T
Property experts say yes!

he most obvious answer to that question
is that there is never a bad time to buy
property, there are times when it is
simply easier or less expensive to buy property.
So why should you be investing in property right
now? Because of the low current interest rate.
Here is a basic explanation of an interest
rate: a country’s central bank is responsible for
setting interest rates. The interest rates that
banks charge make loans more expensive.
When interest rates are high, fewer people and
businesses can afford to borrow. This lowers the
amount of credit available to fund purchases,
slowing consumer demand. At the same time,
it encourages more people to save (if they can)
because they receive more on their savings rate.
Higher interest rates also reduce the capital
required to expand businesses, strangling
supply. This reduction in liquidity usually slows
the economy down.
As you would expect, low interest rates have
the opposite effect on the economy. Low
mortgage interest rates have the same effect
as lowe r housing prices, stimulating demand
for real estate. When savers find they get less
interest on their deposits, they might decide
to just spend more. They might also put their
money into slightly riskier, but more profitable,
investments - thus driving up stock prices.
Low interest rates make business loans more
affordable. This encourages business expansion,
and creates new jobs.
Why this is important is because in South
Africa the South African Reserve Bank has kept
its benchmark repo rate unchanged at a fourdecade low of 5.00 percent since last July. And
with interest rates stable barring any unforeseen
disasters, this means that the housing market is
a good investment, with lower mortgage interest
rates. In the long–term this will see house prices
go up as more people buy property now with a
lower interest rate. “The historically low interest
rate combined with subdued demand has brought
about the ideal buying market conditions,” says
Seeff Randburg managing director, Tony Ketcher.
The more people who buy, the less the availability

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June 2013 SA Real Estate Investor

www.reimag.co.za