Property experts weigh in on the SARB's 0.25% interest rate cut, and how it's expected to impact homeowners and property investors.
South Africa’s third consecutive interest rate cut is welcome news for the property sector.
Greg Dart, director of High Street Auctions, says although the prudent easing does not go far enough yet to ease the rising cost of living, it supports rising confidence that South African growth is on an upwards trend, buoyed by optimism around the Government of National Unity (GNU).
With interest rates rising by less than expected (3% year-on-year in December), market commentators had widely expected a 25-basis point interest rate cut this Thursday. With further cuts expected later in the year - market forecasts suggest further repo rate cuts of 0.25% to 0.5% for 2025 - the property sector could expect the final rate to settle between 7.25% and 7.5%. We will just need to remain wary of potential external risks, such as the U.S. trade policies and their impact on the rand.
For residential and commercial property in the country, these repo rate cuts will encourage more buyers to invest in South Africa.
Lower interest rates will help make home loans more affordable, potentially encouraging more buyers to enter the market. This increased demand may lead to a boost in property sales and could stimulate price growth in certain areas. However, the extent of this impact will depend on overall economic conditions and consumer confidence.
For the commercial property sector, lower interest rates can ease some financial pressure on businesses by reducing the cost of financing, while supporting increased investment and the sector’s recovery. However, the overall impact will depend on broader economic factors and the specific dynamics of the commercial property market.
High Street Auctions is cautiously optimistic that South Africa will see further interest rate relief over the medium term, despite recent reports around friction in the GNU, a slowdown in global growth and rising inflation in major economies.
Further rates cuts are likely to follow during a more buoyant 2025 according to Tyson Properties
Chris Tyson, CEO of national real estate agency, Tyson Properties, today welcomed another 25 basis point cut.
Confident that further rates cuts are still to follow despite a slight uptick in the inflation rate to 3% in December (which remains below the SARB’s benchmark 4.5%) and global economic policy uncertainty in the wake of US President Donald Trump’s re-election, Tyson is confident that this latest cut is good news for the property market.
Interest rate cuts by the SARB are beginning to add up to some meaningful relief for South African home owners. As a result, Tyson Properties is positioning itself for a more buoyant market during 2025 and expects a recovery in key regions such as Gauteng and KwaZulu-Natal, while the Cape property market continues to perform.
Although Tyson believes that the SARB will continue along the ultra-cautious trajectory that saw repeated decisions to maintain the repo rate unchanged at a 15-year high of 8.25% until September 2024, he believes there is a strong chance that the interest rate might ultimately drop to around 7%. This will give both buyers and sellers waiting out the 2024 interest rate plateau more confidence to enter the property market, he says.
Over the long-term - and should the interest rate decline continue as expected - Tyson envisages that the residential property market will move from a buyer's market to a normal market within two years.
Even if the SARB begins to hold rates once more at a lower point, he says that this should provide the property market with some stability and predictability which would entice those contemplating longer term investments to look to buying properties.
Rate cut relief: How the property market stands to gain in 2025
For homeowners and prospective buyers, this is fantastic news. Experts from the Rawson Property Group, David Jacobs and Leonard Kondowe, share insights on how this development will impact the market in the short to medium term.
A sustained trend of relief
This latest cut follows two rate reductions in late 2024:
- September 2024: The SARB reduced the prime lending rate by 25 basis points to 11.5% - the first rate cut in over four years.
- November 2024: Another 25-basis-point cut brought the rate down further to 11.25%.
David Jacobs, Regional Sales Manager for the Rawson Property Group, believes these cuts are a turning point for the South African property market. “The consistent decrease in rates is a strong signal of SARB’s confidence in the economy’s ability to maintain lower inflation,” he says. “For the property market, this trend is unlocking affordability and creating momentum, especially among first-time buyers.”
Jacobs explains that the downward trend in rates is vital for market confidence. “The market was stabilising after the post-COVID boom of 2022 and 2023. These rate cuts give us the push needed to stimulate fresh buyer interest, particularly in segments like the mid-market and first-time buyers.”
Rate cut welcomed, but it should have been 50bps, says Seeff
While the 25bps interest rate cut by the Reserve Bank, taking the repo rate to 7.50% (from 7.75%), and the prime rate to 11% (from 11.25%), is welcome news for the economy and property market, Samuel Seeff, chairman of the Seeff Property Group says it’s simply not enough.
A 50bps cut would have been far more meaningful, and he says there was adequate support for the Reserve Bank to counter the economic stagnation and unemployment risks with a more robust cut. The country can no longer afford what is effectively the highest real interest rate in the world (differential between the interest rate and inflation) while the economy is limping along, barely growing, and unemployment is spiking.
Seeff says the lack of growth and unemployment is a far greater risk than inflation. Given that GDP growth and employment is the most critical element right now, it seems out of step for the Bank to persist with the interest rate policy aimed at containing inflation between 3% to 6% when inflation is in any event at the bottom of the target range.
Our view is that the Bank must prioritise GDP growth and reduced unemployment over exchange rate concerns. GDP growth and increased employment cannot be achieved with high interest rates. Only bolder rate cuts can provide the necessary economic stimulus, and there is historic precedents for the Bank to step in such as during the Covid-pandemic period for example.
Seeff says while there may be a trade-off on the exchange rate and concern about the impact on investment, a growing economy may well provide adequate counter-balance to this, and in fact encourage more investment. We could then potentially see the currency get stronger.
As a result of the 25bps rate cut, mortgage repayments will reduce by:
- R750 000 bond – from R7 869 to R7,741– thus saving R128
- R900 000 bond – from R9 443 to R9,290 – thus saving R153
- R1 000 000 bond – from R10 493 to R10,322 – thus saving R171
- R1 500 000 bond – from R15 739 to R15,483 – thus saving R256
- R2 000 000 bond – from R20 985 to R20,644 – thus saving R341
- R2 500 000 bond – from R26 231 to R25,805 – thus saving R426
- R3 000 000 bond – from R31,478 to R30,966 – thus saving R512
- R5 000 000 bond – from R52,463 to R51,609 – thus saving R854
- (Based on a 20-year repayment period at the prime rate)
Great start for 2025 as interest rates drop further
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, welcomes the decision to lower the repo rate by 0.25%. This adjustment provides some much-needed relief for South African consumers and is expected to have a positive impact on the local property market.
“Following previous rate cuts in September and November, this additional adjustment positions the property market for potentially more favourable conditions in the months ahead, keeping in mind that the impact of an interest rate reduction typically becomes evident a few months after the market has had time to adapt to the change,” says Goslett.
This cut will also help mitigate some of the potential risks that face the South African economy following Trump’s recent inauguration. His appointment introduces new uncertainties and potential shifts in global economic policies, which could indirectly affect the South African economy and real estate market.
Very encouraging news for home buyers
Dr Andrew Golding, chief executive of the Pam Golding Property group, says today’s announcement is very encouraging news for aspirant home buyers and those with existing mortgages, particularly as the outlook for interest rate relief has shifted significantly during recent weeks.
This is the third consecutive interest rate decrease, following reductions of 25bps at both the September and November 2024 MPC meetings, bringing the total interest rate relief in this current downward cycle to 75bps.
Although this month’s (January 2025) rate cut was widely anticipated, the outlook for interest rates for the remainder of the year is far less clear with opinions ranging from no further interest rate relief to one single cut of 25bps. However, the timing of any further rate cut is also debated with some commentators suggesting March 2025 and others later in the year.
This would make the current interest rate-cutting cycle unusually shallow. This is largely a reflection of the heightened uncertainty in the current global economy amidst concerns of a resurgence in inflationary pressures which is making many central banks - and the SA Reserve Bank in particular -cautious.
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