{"id":13543,"date":"2023-10-26T13:43:04","date_gmt":"2023-10-26T13:43:04","guid":{"rendered":"https:\/\/techandbiz.com.ng\/?p=13543"},"modified":"2023-10-26T13:43:04","modified_gmt":"2023-10-26T13:43:04","slug":"why-the-2023-interest-rate-picture-is-different-to-2019-and-when-the-property-market-can-expect-a-reprieve","status":"publish","type":"post","link":"https:\/\/techandbiz.com.ng\/wp10\/2023\/10\/26\/why-the-2023-interest-rate-picture-is-different-to-2019-and-when-the-property-market-can-expect-a-reprieve\/","title":{"rendered":"Why the 2023 interest rate picture is different to 2019 and when the property market can expect a reprieve"},"content":{"rendered":"

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The rapidly rising interest rates and living costs have had a marked effect on the property market, where sales volumes and price growth have slowed in recent months. Clive Bredenkamp, IT Executive at leading local proptech and fintech company e4<\/a>, says although the interest rates aren\u2019t that much higher than in 2019, the market is more sluggish than usual, and several industries are struggling as the total monthly bond registrations have almost halved since the 2021 peak.<\/p>\n

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\u201cDuring the pandemic, interest rates were the lowest we had seen in many years, which caused a mini-boom in property activity. What\u2019s interesting is that even though the rates are now only on average 1.5% higher than in 2019, the reaction of the market has been more drastic because of the aggressive low we saw in 2020.\u201d<\/p>\n

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This has a far-reaching effect on several industry players, he says. \u201cWhen interest rates rise, banks become more cautious with loans because they know clients tend to get in more financial trouble during such an uptick. This, in turn, affects everyone in the property value chain. Sellers, estate agents and mortgage originators struggle in a stagnant market. Conveyancers, transfer attorneys and bond attorneys are also affected.\u201d<\/p>\n

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He explains: \u201cBanks, on average, have panels of about 600-800 bond attorneys. The higher the transaction volumes, the more they can spread those transactions across large and small law firms. Smaller firms who might get a few transactions per month, rely on that income to grow their firm and to pay employees. Without it, they shrink. Transfer attorneys, though they get transactions from estate agents and developers rather than banks, have a similar problem of lack of supply.\u201d<\/p>\n

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In fact, it affects the entire economy. \u201cProperty is a massive industry. Developers and construction companies are all affected. Companies that do gas, electrical, fencing, and entomology compliance certificates are affected. And the government doesn\u2019t receive as much income from transfer duties,\u201d says Bredenkamp.<\/p>\n

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The good news is that the property market is cyclical. \u201cWe\u2019ve been tracking interest rates and bond volumes for over 20 years at e4, and the stats show a clear correlation between interest rates and property transactions. As interest rates rise, there\u2019s a downturn in property transactions and as they come down, there\u2019s an uptick in property sales \u2013 with around a three-to-six-month lag in between.\u201d<\/p>\n

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Until the rates get lower again, banks are looking at creative ways to invigorate the market, he says. \u201cEven though banks are more cautious with granting loans now, they still have targets to meet and when consumers don\u2019t buy properties, their mortgage portfolios suffer. So, they become motivated to grant more loans because there are fewer applications. They usually change their loan-to-value ratios during these times and start looking for bigger deposits, amongst other strategies.\u201d<\/p>\n

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Bredenkamp and other experts expect an upturn in the market in the second half of 2024. \u201cUnless something drastic happens, we expect to see interest rates start coming down again in the second half of 2024. And when they do, the market volumes should respond within 3 to 6 months towards the end of 2024. And with that, all the other affected industries will start to receive a much-needed recovery. For buyers it\u2019s helpful to remember that interest rates have been worse in the past, and a slow down does tend to rationalize prices and calm the speculative growth in asking price we have seen since 2021.\u201d<\/p>\n

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\u00a0   The rapidly rising interest rates and living costs have had a marked effect on the property market, where sales volumes and price growth have slowed in recent months. Clive Bredenkamp, IT Executive at leading local proptech and fintech company e4, says although the interest rates aren\u2019t that much higher than in 2019, the […]<\/p>\n","protected":false},"author":1,"featured_media":13544,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26],"tags":[],"class_list":{"0":"post-13543","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business"},"_links":{"self":[{"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/posts\/13543","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/comments?post=13543"}],"version-history":[{"count":0,"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/posts\/13543\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/media\/13544"}],"wp:attachment":[{"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/media?parent=13543"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/categories?post=13543"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/techandbiz.com.ng\/wp10\/wp-json\/wp\/v2\/tags?post=13543"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}