MAIN IMAGE: JP Viljoen, head of home ownership at Nedbank
The South African Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC) has announced its decision to keep the repo rate unchanged at 7.5%. While the local property and real estate sectors had hoped for a further reduction in interest rates to stimulate affordability and demand, this hold was not unexpected. It reflects a carefully considered response to mounting global uncertainties – ranging from trade restrictions and geopolitical tensions to policy shifts in major economies – that collectively pose a risk to global inflation and capital flows.
The decision signals the MPC’s commitment to maintaining macroeconomic stability amid a fragile and unpredictable external environment. Although inflation in South Africa has eased significantly – dropping below the midpoint of the SARB’s 3–6% target range, with recent figures showing the consumer price index at just 3.2% – the committee remains cautious about upside inflationary risks that may emerge due to global supply chain disruptions, commodity price volatility, and shifts in foreign policy abroad. These factors, while not local in origin, have material implications for South Africa’s open and trade-exposed economy.
Implications for the property and real estate market
From a property market perspective, the unchanged repo rate extends a period of cautious optimism. The 3 rate cuts delivered since late 2024, each 25 basis points, had begun to provide much-needed relief to households following a prolonged tightening cycle that pushed the prime lending rate to a peak of 11.75% in 2023. These reductions have helped ease monthly bond repayment burdens and began to nudge consumer sentiment upwards.
However, with the rate now paused, momentum may stall somewhat. First-time buyers and middle-income households, who are particularly sensitive to financing costs, remain under pressure. Affordability challenges will continue to persist due to high unemployment, modest income growth, and the growing strain from debt repayments. The continuation of the current rate holds the cost of credit steady, but it does not substantially alter affordability dynamics or trigger a significant uptick in market activity.
Transaction volumes remain below pre-2022 levels, and while we have seen some resilience in the affordable-housing segment (particularly homes under R700 000), the broader market continues to reflect subdued demand. House price growth has been muted, with real price declines evident after adjusting for inflation. Without additional monetary stimulus or material income growth, this trend is likely to persist.
A sector in need of structural and policy support
While monetary policy plays a critical role in shaping market sentiment and affordability, it is only 1 piece of the broader puzzle. Structural issues – such as constrained economic growth, intermittent electricity outages, and unemployment as high as 41.9% (when including those discouraged from seeking employment) – continue to weigh heavily on housing demand.
That said, SARB’s decision to hold, rather than hike, is still preferable to a reversal of the easing cycle. Stability in interest rates provides a level of predictability to buyers, developers, and financial institutions. It allows banks to continue extending credit cautiously while buyers plan with greater confidence in repayment forecasts.
Foreign investment in high-end real estate, particularly in regions such as Cape Town’s Atlantic Seaboard and Johannesburg’s elite suburbs, is likely to remain robust. A stable interest rate and currency environment reassure international investors, especially in a climate where South African assets are perceived as undervalued in global terms.
Looking ahead: What the market needs
The broader implication of this rate pause is that the real estate sector must look beyond interest rates for recovery. While further rate cuts would certainly assist, especially in unlocking pent-up demand and stimulating construction activity, what is urgently needed is a holistic approach. This includes policy certainty, improved infrastructure reliability, targeted support for first-time buyers, and reforms that unlock broader economic participation.
If global headwinds subside in the coming quarters and inflation remains well anchored, there may still be room for a more accommodative policy stance later in the year. For now, however, SARB’s steady hand sends a clear message: growth support will not come at the expense of stability.
While the MPC’s decision to hold the repo rate may not be the catalyst the property sector hoped for, it is a rational response to global volatility. It provides a platform of stability from which the sector, and the country at large, can continue to build. With continued structural reforms, improved employment prospects, and responsible monetary policy, South Africa’s property market can gradually regain momentum and unlock its potential in the years ahead.
