With yesterday’s 50 basis point increase and subsequent prime lending rate raising to 11.75% (coincidently not the highest it has been in our Country’s history) the already stressed consumer is now stretched even further.
The Governor of the Reserve Bank having stated that albeit some aspects of inflation had cooled, inflation remained outside the bank’s target of between 3-6%. Meaning that if the key indicators did not reduce within the next review period the chances of a further increase of the REPO were likely. Coupled with unstable energy and an international market already shaken by the war in the Ukraine and potential default of the United States… the likelihood is sadly high.
But what does this all mean, well reviewing the chart below paints a picture of the current (bonded) consumers situation:
The increase in bond repayments further strains the average consumer’s spending power, meaning that many consumers will be forced to cut spending onother non-essential items. A knock effect and thus causing further contraction to an already shrinking economy.
But it is not all doom and gloom, for the astute buyer looking to purchase for investment opportunities, the rental market is booming. Due inpart because of the increase in the interest rate amongst other factors. Further, with more than half of the current market across all age groups deciding to rather rent than buy because of rising costs and inability to or lack of desire to purchase. The idea of either holding on to an asset or buying to generate an income seems plausible.
The “buyer’s market” means that purchasing a property at a good price isnow more likely as many are offloading their homes in order to curb expenses.Albeit rental comes with its own issues, it does, if the correct checks are applied, mean that one can generate a secondary income to buttress againstraising costs. Just ensure that you choose the right conveyancer to ensure asmooth transfer.
We at Thomson Wilks will continue to monitor the market and will continue to update you. Contact us for all your legal needs.
#PropertyLaw #Conveyancing#PropertyInvestments #InterestRates #changes # #thomsonwilksinc#thomsonwilksattorneys
26 May 2023
Roberto Louw - Associate