The recent news that inflation has dropped to 4.6%—the lowest level since mid-2021—is a promising sign, especially when considering the potential for interest rate cuts. However, the reasons for optimism extend beyond this.
The government appears to be moving toward a more stable position, with a renewed focus on economic growth. There is a noticeable sense of positivity, with younger leaders eager to implement change and help the country return to a growth trajectory. Additionally, the absence of loadshedding further bolsters confidence, signalling that improvements are being made, and a more stable energy supply is within reach. A reliable energy infrastructure is essential for boosting GDP growth, which, in turn, can lead to more job creation, increased wealth, and heightened demand for property.
Positive sentiment is crucial to the property market. People are more likely to invest in property—a long-term commitment with a payback period of around 20 years—if they have faith in the future. For the first time in many years, there is a growing sense that the country's outlook is improving.
Couple this with the potential for declining interest rates, and it provides an additional incentive to invest in property. Buyers tend to shy away from purchasing when interest rates are rising due to the uncertainty of how high they may go. However, if you can afford to buy at the current interest rate of 11.75%, and rates appear to be heading downward, you can feel more confident in your investment.
Furthermore, most regions of the country have not experienced significant capital appreciation in property values over the past 5-7 years, even at the higher end of the market. This means that buying property now is comparable to purchasing at prices from several years ago. At some point, property values will increase again, and those who invest now could benefit from future appreciation.
There is a unique opportunity right now for buyers. Banks are still willing to lend, deposit requirements remain low compared to the past decade, and qualifying buyers can secure favourable interest rates. Historically, those who invested before a property boom have seen significant capital appreciation, while those who wait may end up paying more once the market is on the rise.
To determine how much you can realistically afford, it's important to calculate your debt-to-income ratio. This will help you understand how much of your income is already committed to debt payments, and what remains available for a potential home loan. Paying off any smaller debts can free up more income, making homeownership more achievable.
Additionally, take a close look at your lifestyle expenses, which can vary from month to month. Consider what's most important to you—whether it's travelling, entertainment, or other priorities—so you can make informed decisions about how much you're willing to spend on housing.
As a general guideline, your monthly housing costs should not exceed 28% of your gross monthly income, and your total debt payments (including housing costs) should not surpass 36% of your gross monthly income.
