As the Rand reaches unsteady levels, what does this mean for your home?
How the inflation rate and Rand manipulation affect homeowners
Category News
Homeowners across South Africa are feeling the pinch of having to tighten their belts. As the economy grows and inflation gets greedier by the second, the average citizen is the one who is most affected. Over the last few weeks, we've seen how the South African banking systems have capitalised on a stagnant living wage and rising inflation. REALGLEN Properties looks at how those who are currently paying off their home loans are managing.
The demand for real estate is a swinging pendulum
Consider the facts of a weak economy. Property markets are in dire straits due to high demand for houses, inability to repay mortgages and low asking prices. This has a cyclical effect of people buying houses, not being able to afford them and the houses going back on the market. The inability to have any sort of financial stability in a household has become the norm in South Africa.
The recent Rand manipulation scandal has left its mark on innumerable people. Countless businesses have suffered, assets have been repossessed and lives have been irrevocably changed. The harsh truth that most South Africans face is the struggle to stay afloat every month. Almost 30 commercial banks have come under fire for price-fixing involving lending terms. On a worldwide stage, the Rand as a currency has underperformed for the last 10 years. With the country teetering on a precarious ledge, it's thought to be the fault of the banks for inflicting a steep margin on borrowers that continues to grow.
As the Rand weakens, real estate suffers
As household income has steadily eroded over the years, homeowners who struggle to honour their financial obligations each month often face higher interest rates for longer terms. This is a never-ending cycle that eventually depletes the opportunity for the consumer to regain their financial footing. In turn, consumerism is the token that affects the market more than anything. The spending habits, income power and borrowing potential of the average consumer take a huge knock during unexpected interest rate hikes and inflation. With service delivery costing more, scarcity of resources and overall lack of distribution of goods, markets are negatively affected.
The consequences of load shedding will also have a knock-on effect on the economy, as loss of man hours results in depleted profits and many businesses shutting their doors. It's also affected the property market with the need for inverters, generators and energy-efficient estates on the rise.
What it will take to recover
Homeowners and consumers are being asked to do a delicate balancing act. Conducting personal lifestyle audits to cut out unnecessary expenses is an essential tool for meeting bond payments, car instalments and more. The more consumers focus on a hierarchy of bills, the easier it will be to juggle, no matter how unfair.
What will happen in the market if the demand for the Rand currency increases
A currency automatically increases in value the moment demand for it is greater than ever before. With a powerful currency, we would not have to worry about inflation costs as much. The current Euro to Rand exchange rate stands at R20, 63 to every one Euro. This conversion illustrates the weakened buying power of the Rand on an international level.
REALGLEN Properties would like to assure readers that the property market in South Africa in the affluent, upmarket residential areas is always looked at as an investment. Commercial, industrial and mixed-use properties and land can be approached in a careful, considered manner with long-term, fixed payment plans in place. Our team of trusted property practitioners will guide you through the most affordable viewings within your budget and help you achieve the ultimate stress-free home-buying experience. Contact us today to learn how to buy a home with peace of mind.
Author REALGLEN Properties
Published 28 Nov 2023 / Views -