Lower interest rates & 100% bonds boost property prices

Property News: ABSA House Price Index

The lowering of interest rates has historically had a delayed effect on property prices. It was no different this time around. According to the latest ABSA House Price Index, low interest rates has been one of the major reasons for the recent increase in property prices.

ABSA Building
image by warrenski

Jacques du Toit, Senior Property Analyst at ABSA Home Loans, believes that the effect of the current lower interest rate cycle will continue to boost property values for most of 2010.
He predicts that residential property prices are going to increase by 6%.

The reintroduction of 100% home loans has also been credited as a important factor in getting the local residential market moving into positive territory.

Most of the major banks currently offer full 100% bonds, but the rates charged on these no deposit home loans are usually not very competitive. Banks are more inclined to offer you a competitive rate on your bond if you can produce a 5% or 10% deposit.

Data from the ABSA House Price Index shows that:
The average price of a small house (80sqm – 140sqm) is R670 000
The average price of a medium sized house (141sqm – 220sqm) is R940 000
The average price of a large house (221sqm – 400sqm) is R1 400 000

Interest Rate Forecast:
Du Toit expects the South African Reserve Bank will keep interest rates unchanged for most of the year, and then to increase them slightly by the end of 2010 to help maintain inflation.

Has reintroduction of 100% bonds sparked you to get back into the property market? Please, share you views with us in the comments section.

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