Hike in rate to keep kids home longer

Nashira Davids

LAST week's interest rate hike could scare potential home buyers into staying at home with the folks or renting for longer.

John Loos, household and property strategist for FNB Home Loans, said the effect would also be felt by those downscaling because of financial constraints.

Last week Reserve Bank governor Gill Marcus raised the rate by 50 basis points. "Not only could rate hikes raise the numbers of [people selling to downscale], but it is also expected to raise the portion of these sellers going into rental properties for the time being as opposed to buying a cheaper property," he said.

"This all leads to one likelihood – stronger growth in demand for rental properties."

But demand for rental homes is already high. Tracy Pugin, of Seeff in Randburg, said rental demand was so strong there were about 20 applicants for every house or apartment available in the area.

Bill Rawson, chairman of the Rawson Property Group, said investing in property for renting was "not high risk".

"The typical South African tenant is a fairly reliable payer, and the risk is minimised by good tenant selection," he said.

In general, Seeff chairman Samuel Seeff said the interest rate increase was unlikely to make a real difference other than to "cool the economy".

"Sentiment is a vital driver of the economy and property market and we have, therefore, encouraged stability," he said.

"As we have seen over the past year, positive sentiment has driven more demand and more balance in the market.

"This announcement could not have come at a more inopportune time."