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South Africa’s housing market continues to show resilience despite last week’s 25 basis point increase in the prime lending rate to 10.5%. Importantly, rates remain well below the 11.75% level seen in 2024, providing a more stable affordability base than during the previous cycle.
While global uncertainty, fuel price volatility and inflationary pressure continue to influence monetary policy decisions, local economic indicators remain broadly supportive. Strong export performance and inflation holding within the 3% tolerance band have helped sustain confidence in the property market.
“Although not ideal, enough has been done in recent months to instil investor confidence in the property market,” says Bradd Bendall, BetterBond’s national head of sales. “South Africa’s economic fundamentals remain on firmer footing, and the housing market is well positioned to absorb recent interest rate movements.”
Despite two consecutive rate holds followed by last week’s increase, home loan applications have continued to grow steadily, recording year-on-year growth of 6.2%. This suggests that demand remains intact, supported by improving affordability compared to 2024 and evolving buyer behaviour.
According to the latest BetterBond Property Brief, home prices have also strengthened significantly over the past year, with first-time buyer prices rising 10.3% and repeat buyer prices increasing 19.9%. Average purchase prices currently sit at R1.4 million for first-time buyers and R1.7 million for repeat buyers.
Rather than being defined by the rate increase, the market impact is becoming increasingly segmented, with different buyer groups responding in different ways.
First-time buyers: affordability under pressure, but pathways still exist
First-time buyers are experiencing the most immediate impact of rising borrowing costs, particularly as deposit requirements have shifted sharply. After a recent downward trend, deposits increased by 33% quarter-on-quarter in April, with first-time buyers seeing a 38% rise.
“This is a significant shift in a tight credit environment,” notes Bendall. “It does place pressure on entry-level affordability.”
However, opportunities remain for well-prepared buyers. Purchasing below the R1.21 million transfer duty threshold or considering new developments can meaningfully reduce upfront costs. In addition, pre-approval is becoming essential in helping buyers understand realistic affordability and avoid wasted effort in a constrained market.
Existing homeowners: pressure builds on monthly budgets
For existing homeowners, the impact of higher interest rates is felt most directly through monthly cash flow.
Rising fuel prices, utilities and general living costs continue to place pressure on household budgets, meaning even moderate rate adjustments require careful financial planning.
While affordability has tightened, households are entering this cycle from a stronger position than in 2024, when borrowing costs were significantly higher. Many homeowners have already adjusted spending behaviour over the past two years, which has improved resilience to incremental increases.
This makes budgeting discipline and proactive financial management more important than reacting to headline rate movements alone.
Rentvesters: flexibility remains a key advantage
The current environment continues to support the growth of rentvesting as a strategic entry point into the property market. For younger buyers especially, renting in preferred lifestyle areas while purchasing in more affordable, high-yield suburbs remains an attractive option. This allows buyers to balance lifestyle flexibility with long-term wealth creation.
Even with higher rates, this strategy continues to offer a pathway into property ownership, particularly where rental demand and capital growth potential remain strong.
Buy-to-let investors: strong demand offsets rate pressure
The buy-to-let segment remains supported by structurally strong rental demand, particularly in high-growth areas such as student hubs and economic corridors.
While higher interest rates do increase the importance of careful cash flow planning, vacancy risk and rental stability remain the key performance drivers of investment returns rather than short-term rate movements.
With home prices at record levels and application volumes remaining healthy, underlying demand conditions continue to support long-term investment viability in well-selected areas.
Empty nesters: lower sensitivity, higher stability
Older buyers remain the least affected segment in a rising rate environment. Many are closer to bond repayment or have significantly lower loan-to-value exposure, reducing sensitivity to rate fluctuations.
According to BetterBond data, buyers over 60 have seen average purchase prices rise by 8.05% year-on-year, reflecting steady activity in this segment.
For this group, purchasing decisions are more closely linked to lifestyle and downsizing needs than affordability constraints, making the impact of rate changes relatively muted.
Regional trends: demand remains strongest where value is highest
Regional demand continues to highlight the resilience of the market. Johannesburg’s South-Eastern suburbs accounted for 23.3% of all home loans granted over the past year, driven by strong relative value and accessibility for first-time buyers. The region also recorded growth of 28.6%, the highest nationally.
The Western Cape remains a key growth driver, accounting for 19.3% of home loan activity and maintaining the highest average loan values at over R1.8 million. Demand continues to be supported by semigration trends and sustained buyer interest.
Conclusion: resilience outweighs rate pressure
While last week’s interest rate increase may moderate expectations of further short-term relief, the broader housing market continues to demonstrate resilience.
Application volumes remain strong, regional demand is sustained and buyer behaviour is adapting rather than retreating. Importantly, affordability remains significantly improved compared to 2024, which continues to underpin transaction activity.
“In a climate shaped by global uncertainty and local cost pressures, the property market is proving its ability to adjust rather than contract,” concludes Bendall. “Sustained demand, especially in high-value regions and among repeat buyers, continues to support long-term stability in South Africa’s housing sector.”
