The SA rental market is in a phase where more people are renting longer due to their inability to save to buy a home.
Rising interest rates are eroding the prospects of potential homeowners, fueling a trend for longer-term rentals, according to the latest report from real estate research and consulting firm Rode & Associates.
In addition to rising interest rates, homeowners must contend with the typical costs of owning a property, such as insurance, fees and taxes, and maintenance, as well as the rising cost of living.
“When it’s cheaper to rent than to buy, it would make sense, purely from a financial standpoint, to religiously rent and save the difference between the rent and what the bond payments would have been. After a few years of saving, a buyer could use the savings for a higher deposit to purchase a home, which by then will likely be priced lower in real terms than it is now,” the Rode report states.
In November, the Reserve Bank of SA’s Monetary Policy Committee (MPC) increased the repo rate by another 75 basis points to 7%. This is the seventh consecutive hike, and interest rates are now at their highest level since 2016. The prime rate is now 10.5%.
Consumer price inflation cooled slightly in November to 7.4%, from 7.6% in October, while food prices continued to rise, reaching 12.5% in November from 12.0% in October. The SA Reserve Bank only expects inflation to “sustainably” return to its target level of 4.5% by the second quarter of 2024.
Adrian Goslett, regional director and CEO of RE/MAX South Africa, says that in recent months, the company’s digital marketing agency has noticed an increase in rental-related search terms and a decrease in search terms related to rentals. shopping.
The FNB Homeownership Barometer also indicates that rising borrowing costs likely shifted some demand for homeownership toward rentals.
