Here’s what the SARB's Monetary Policy Committee's (MPC) decision to keep the repurchase rate at 7.5% per annum, and the prime rate steady at 11%, means for those in the property market.
Unchanged interest rate disappointing, missed opportunity
Samuel Seeff, chairman of the Seeff Property Group. says the decision by the MPC to retain the interest rate at the current level of 7.50% (prime rate at 11%) is disappointing, and a missed opportunity to provide vital relief to consumers and property buyers, and a boost to the economy.
Despite the decision by the US Fed to retain its interest rate at the current level, usually an indicator of which way the SARB may go, Seeff says there were compelling reasons and an opportunity for the Bank to step in with an interest rate cut, not just of 25bps, but even a more meaningful cut of 50 bps.
The news that inflation remained 3.2% for February provides further support that there is a window of opportunity given that inflation remains contained near the bottom of the Bank’s inflation target range while the currency has remained fairly stable. Seeff says it is regrettable that the Bank did not take advantage of the economic benefits which could flow from a lower interest rate in the current climate.
Notably, the interest rate is still 100 bps above the pre-Covid level while inflation has come down considerably, now at 3.2% for the last two months compared to the average of 4.4% for 2024, and 6% average in 2023. He says the gap between the interest rate and inflation remains one of the highest in the world (according to economist, Dr Roelof Botha).
Keeping the rate so high for so long continues to do more damage than good to the economy, especially when it needs vital stimulus to boost growth and job creation, the lack of which pose a far greater risk than inflation. Households are already burdened by the higher cost of credit, including home loans, on top of further Eskom tariff, VAT and tax hikes.
Seeff says the property market has kicked off the year on a busy note with sales volumes continuing to increase as buyers take advantage of the lower interest rate. The continued favourable mortgage lending conditions, along with the increase in the transfer duty exemption threshold is a boost for the market. Stock levels are coming down, and prices are likely to start increasing more meaningfully compared to the last two years.
The luxury property market has seen a particularly strong start to the year, especially in the Cape Metro area where we are seeing an influx of local and international buyers snapping up high value properties. This also correlates well with information from ABSA that confidence in the property market is at the highest level in ten years.
Unchanged repo rate disappointing news for home buyers
“With the February 2025 consumer inflation rate unchanged at 3.2% - below market expectations – the MPC's decision not to reduce the repo rate was disappointing for existing mortgage holders and aspirant home buyers," , says Dr Andrew Golding, chief executive of the Pam Golding Property group.
While economists were divided ahead of the MPC decision, some argued that given the sluggish state of the local economy, real (inflation-adjusted) interest rates are too high, suggesting scope for further interest rate relief. Those analysts who predicted no cut at today’s MPC meeting were generally forecasting further interest rate reductions later in the year when – it is hoped – there is more global economic certainty, and as long as inflation remains contained.
Meanwhile, a large petrol price cut is anticipated in April, currently estimated at around 80-90c per litre, which could further help to dampen inflation.
That said, the economic outlook is currently uncertain, with erratic trade tariff policies in the US causing a deterioration in global growth expectations and a worsening in the inflation outlook. Across the ocean, US consumer inflation expectations have surged to the highest level in 30 years as a result of the tariff turmoil.
For existing homeowners and residential property investors, there is comfort in the fact that national house price inflation has risen steadily from a low of 2.2% in late-2023 to +6.22% in February 2025, according to the Pam Golding Residential Property Index, which is the strongest growth rate in national house prices since late-2007. This rebound has also outpaced the turnaround in the consumer inflation rate from a low of 2.8% in October 2024 to 3.2% in February 2025, resulting in real (inflation-adjusted) growth in house prices for six consecutive months. Real house prices rose by +3.0% in February 2025, a level last seen in September 2007.
Notably, growth in house prices has accelerated across all three major regions. The recovery in Western Cape house price inflation continued to gather momentum in February 2025, rising to +6.04% from a lower turning point of +4.7% in March 2024, while both Gauteng and KwaZulu-Natal continued to rebound strongly last month (February 2025), rising to +4.5% and +3.11% respectively. (Source: Pam Golding Residential Property Index)
An intricate balancing act
This is how Tyson Properties CEO, Chris Tyson, describes the current state of play within South Africa’s property sector following today’s decision by the MPC to pause interest rate cuts.
Although Tyson predicted a series of cautious rate cuts between September last year and mid-2025, this halt in no way means that the interest rate easing cycle is at an end, he believes.
The Reserve Bank has cut interest rates three times since September 2024. Although, individually, each 25 bps cut did not have a major impact on home financing, the combination of three consecutive cuts is still beginning to have a positive impact and is sparking improved market sentiment.
Tyson points out that with the consumer inflation remaining unchanged in February 2025, this remains within the Reserve Bank’s favoured target band opening the way for further rates cuts later this year. With fuel prices holding steady together with the rand despite US President Donald Trump’s decision to expel the South African ambassador, he remains optimistic that there will be further relief further down the line.
Transfer duty adjustments announced in the government budget are another positive signal for property investors, especially those entering the market for the first time. Buyers at the bottom end of the market will not have to pay transfer duties on properties below R1.21 million, Tyson adds.
However, although the VAT increase will not directly impact property sales, he says that it will ultimately put pressure on peripheral costs such as legal fees, agent commissions, home related services and construction. Already, month-on-month inflation has accelerated due to increased pressure on the prices of food and financial services and the VAT increase is expected to exacerbate this.
Tyson cautions buyers and sellers to carefully balance the leeway afforded by the previous rates cuts against other factors that could impact on household disposable income, including the proposed increase in VAT and upcoming hikes in electricity tariffs in April.
In the short to medium term, he says it remains important for sellers to price their properties correctly to attract the now growing pool of more optimistic buyers in most key markets across South Africa. On the flip side, buyers need to exercise caution and stay well within their means when purchasing new properties - but can be more confident knowing that a more positive market is already paving the way for an improvement in property values.
The Reserve Bank keeps the benchmark interest rate at 7.5%, maintaining a cautious stance.
Greg Dart, director of High Street Auctions Co says, the decision by the MPC to pause its cautious course of 25-basis point interest rate cuts dating back to September last year is unlikely to stem the positive sentiment in the property sector.
Today’s decision to hold the benchmark interest rate at 7.5%, after three consecutive quarter-point cuts reflects the Reserve Bank’s default position of caution as it evaluates the full impact that government’s recent stop-start budget and America’s fluctuating trade policies will have on inflation. Despite US President Donald Trump’s decision to expel South Africa’s ambassador and hints that this country may no longer benefit from the Africa Growth and Opportunity Act (AGOA), all is not doom and gloom when it comes to South Africa’s economy.
It is interesting to note that the rand held firm in the face of this potential negativity, perhaps signalling a favourable response to the fact that the ANC’s policy making will be tested by the Government of National Unity. An expectation of 1.8% economic growth and the potential for inflation to remain within the Reserve Bank’s favoured inflation target range of three to six percent, augurs well for further interest rate cuts later in the year with the strong possibility of the repo rate even settling at 7% and the prime lending rate at 10.5% further down the line.
Investors – and especially those looking to repurpose commercial properties for residential sale – stand to benefit not only from the interest rate cuts to date but also from the adjustment in transfer duties on properties below R1,21-million announced in the recent proposed budget.
However, as with the Reserve Bank, caution is important and all need to remain aware that the proposed VAT increase and electricity tariff hikes due to take effect in April which will put pressure on households’ disposable incomes. Commercial property investors, in particular, will need to wait to fully benefit from a reduction in the cost of raising finance. This sector remains over supplied across all markets except for the Western Cape. The High Street Auction Co therefore remains optimistic that the property sector as a whole continues to move in the right direction and that positive sentiment will gather momentum during 2025.
Unpopular decision to keep interest rates unchanged
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, feels that it was a missed opportunity for the SARB not to cut interest rates at this meeting.
“While I acknowledge the risks to our inflation expectations, I still think that the SARB acted too cautiously. A rate cut would have provided much-needed relief to consumers who might be facing increased financial strain due to key decisions announced in the Budget Speech. An interest rate cut at this time could have offset some of this potential strain and create greater opportunity for economic growth – which is something our country desperately needs,” he comments.
Speaking to real estate agents, Goslett highlights that following the Budget Speech and this announcement, affordability will remain a top concern for most buyers. “My advice is that agents should offer more support during this time, putting buyers in touch with a bond originator or recommending a financial advisor to help them fully understand what they can afford within this market,” he recommends.
Looking ahead, RE/MAX of Southern Africa encourages both buyers and sellers to stay informed about economic trends that could impact the real estate sector. “Future decisions by the SARB will depend on inflation trends and global economic conditions – both of which are facing significant upside risks that could lead to the Reserve Bank maintaining its tight stance on interest rates going forward,” says Goslett.
While interest rate hikes are not forecasted for the year, the chance for further interest rate cuts is unlikely. “Those who are already in the market or are hoping to get into the property market should work closely with real estate professionals to make informed decisions as and when market conditions change,” says Goslett.
Interest rates hold steady – a win for market confidence
The South African Reserve Bank has kept interest rates unchanged, a move that supports affordability and gives both buyers and homeowners a welcome sense of predictability.
“A stable interest rate environment gives buyers confidence to move forward without fear of sudden repayment increases,” says Clarke. “For homeowners with existing bonds, it also means no rise in monthly repayments, allowing them to manage budgets more effectively," says Tony Clarke, MD of the Rawson Property Group.
While many were hoping for a rate cut, Clarke sees stability as a positive sign for long-term property growth.
“Steady interest rates encourage consistent market activity rather than drastic shifts," he explains. "This is good for buyers, sellers, and investors looking for predictable conditions."
Extremely disappointing after such positive predictions regarding the prime lending rate towards the end of last year,
Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, says it’s extremely disappointing after such positive predictions regarding the prime lending rate towards the end of last year, that the three-meeting cycle of minute repo rate drops has already come to an end.
“We’ve seen a 75-basis point drop in recent months, but it’s absolutely not enough to get consumers out of the horrific debt situation that everyone from the lowest to the highest income earners are trapped in.
“DebtBusters’ Q4 2024 figures reveal that South Africans are allocating an alarming 68% of their take-home pay to service debt – the highest level since 2017. For higher earners taking home more than R35 000 per month, the situation is even more dire, with 74% of their income going toward debt repayment.
“This is unsustainable. Right now, we have nearly 45% of South Africa’s population receiving welfare grants, but continue in this direction and that number is going to rocket to put well over 50% of the country over the poverty line.
“Add a VAT increase and the picture is not pretty.”
“The Reserve Bank Governor made reference in his announcement of an unchanged rate, to the fact that ‘the global economy is not on a stable footing’, which is a politically correct way of saying that we’re losing the game of chicken we’re playing with America and its allies.
“If we don’t immediately revise our foreign policies, the outlook is going to get a lot worse and the ultimate losers will be South Africa’s citizens. As business, we call on the government to start working for the good of the country, not the good of certain people within the majority party. It’s no longer about balancing economic outlooks; it’s now a matter of survival for South Africa as a nation.”
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