SA Property Market Confidence Up as Interest Rates Hold Steady

As anticipated by economists, the South African Reserve Bank kept the repo rate at 8.25% and the prime lending rate held steady at 11.75% at this week's Monetary Policy Committee meeting. This is a move welcomed by property experts. We weigh-up their views.

Rawson Property Group

David Jacobs of the Rawson Property Group highlighted the stabilizing effect of unchanged rates on market confidence, despite ongoing affordability challenges. While inflation remains high, dampening hopes for near-term rate cuts, market anxiety over potential rate hikes has lessened.

Pre-election caution has slowed activity in higher price brackets, but overall confidence is growing. Semigration trends are easing due to rising property prices in popular destinations, while Gauteng shows signs of recovery. Lenders remain keen to attract qualified home finance applicants.

Pam Golding Properties

The future path of interest rates hinges on forthcoming data, with potential for minor rate cuts by year-end if inflation continues to decline.

Positive developments include a reduction in headline CPI to 5.2% in April, easing food and services prices, and a forecasted drop in petrol prices. The local economy shows improvement due to reduced load shedding and fewer logistic bottlenecks.

Post-election, the macroeconomic environment is expected to become more supportive, possibly leading to interest rate cuts in September and November. The stable repo rate and anticipated rate relief have already spurred increased activity in the residential property market. According to the Pam Golding Residential Property Index, national house price growth rose to 3.4% in April 2024, with sectional title properties showing strong demand and price inflation. This trend indicates a continued recovery in house price inflation.

Tyson Properties

Today's announcement by the South African Reserve Bank’s Monetary Policy Committee that the repo rate will remain unchanged at 8.25% was expected and will see the property market maintain its current performance, according to Tyson Properties CEO, Chris Tyson.

Optimism grew in late 2023, with markets in Gauteng, KwaZulu-Natal, and Eastern Cape gaining traction, continuing into 2024. The Western Cape market remains buoyant. Tyson notes the decision comes after a highly contested general election. He believes political stability and reduced loadshedding could drive economic recovery, despite GDP growth forecasts of around 1%.

A stable environment may boost the property market, with many potential investors deciding to enter. Continued uncertainty and inflation above 5% could benefit the rental market, sustaining a buyers' market.

RE/MAX South Africa

Adrian Goslett, Regional Director of RE/MAX of SA, says the announcement will be a bitter pill for most South Africans. "Although economists predict the interest rate cutting cycle to start in 2025, many hoped for a cut now," he notes. Despite strong demand for real estate, poor economic growth and high interest rates hamper house price growth.

Buyers struggle to qualify for high-priced properties, forcing sellers to lower prices. Goslett advises consumers to manage debt closely and seek help if needed, as timely intervention can improve financial situations. House prices will likely remain stagnant until broader economic conditions improve.

Ooba Group

The South African Reserve Bank’s Monetary Policy Committee announced its decision to hold the repo rate at 8.25% and the prime lending rate at 11.75% for the sixth consecutive time, aligning with market expectations. Rhys Dyer, CEO of ooba Group, noted that while the property industry initially anticipated a rate cut by mid-2024, this is now expected to be delayed until the first quarter of 2025 due to persistent inflation and macroeconomic conditions.

Despite this, banks continue to offer attractive lending conditions, including high loan-to-value ratios. Dyer advises homeowners to consider strategies such as renegotiating interest rates, extending repayment terms, and adopting rigorous savings plans to mitigate the impact of high interest rates.

Looking ahead, Dyer believes the property market is well-positioned for future interest rate cuts, which will be crucial in boosting market activity and economic growth.

Seeff Property Group

Seeff PG chairman, Samuel Seeff, expressed disappointment over the Reserve Bank’s decision to maintain the repo rate at 8.25% and prime rate at 11.75%. He criticized the high rates for negatively impacting the economy and property market, arguing that the Bank's hawkish stance has not effectively reduced inflation, which is largely imported.

Seeff emphasized that the high interest rate burdens consumers and hampers property investment despite a high desire for ownership. He urged for urgent rate cuts to stimulate economic growth and improve market conditions. Despite challenges, Seeff noted that favorable bank lending conditions still support first-time buyers.

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