SARB Holds Interest Rates at 7.5% - A Missed Opportunity for Economic Growth

Top 3 Key Points:

• Interest rate freeze disappoints: SARB maintains the repo rate at 7.5% and prime at 11%, dampening hopes for economic relief.
• Property market remains resilient: Transfer duty adjustments support first-time buyers, but VAT and tariff hikes may strain affordability.
• Cautious optimism for future cuts: Analysts predict potential rate reductions later in 2025 if inflation stays within SARB’s target range.

Interest Rate Hold: A Double-Edged Sword

The South African Reserve Bank (SARB) has opted to keep the repo rate at 7.5%, with the prime lending rate remaining at 11%. While this move ensures stability in borrowing costs, it has been met with frustration from property experts who believe a rate cut could have injected much-needed momentum into the market.

Many had hoped for at least a 25-basis-point reduction, especially after inflation remained steady at 3.2% in February - comfortably within SARB’s preferred target band. However, economic uncertainty, global trade concerns, and upcoming VAT and electricity tariff increases have made the central bank cautious.

Despite this, property professionals remain hopeful that future cuts could be on the horizon. Here’s what some of the industry’s top voices had to say:

Chris Tyson, CEO of Tyson Properties

Chris Tyson sees this as a temporary pause in the rate-cutting cycle rather than a definitive stop. He notes that while each individual rate cut has had a limited impact, the cumulative effect is beginning to boost market sentiment. With inflation stable and the rand holding firm despite geopolitical pressures, he remains optimistic about further cuts later in the year.

Tyson also highlights the positive impact of increased transfer duty exemptions for properties under R1.21 million, making homeownership more accessible.

However, he warns that the VAT increase will add pressure on legal fees, agent commissions, and home-related services, which could erode some of the financial relief from lower transaction costs.

Greg Dart, Director at High Street Auctions

Dart acknowledges SARB’s cautious approach but believes the market’s positive sentiment will continue. He points out that while US trade tensions could pose risks, the rand’s resilience signals underlying confidence in South Africa’s economic trajectory. He anticipates further rate cuts later in 2025, possibly bringing the repo rate down to 7% and prime to 10.5%.

He sees opportunities for investors, particularly in repurposing commercial properties for residential use, and expects the transfer duty adjustment to stimulate activity in the lower-end housing market. However, he cautions that VAT increases and electricity hikes could squeeze disposable incomes, requiring careful financial planning for buyers and investors.

Samuel Seeff, Chairman of Seeff Property Group

Seeff expresses disappointment, calling it a missed opportunity to stimulate the economy. He argues that with inflation at just 3.2%—well below the pre-COVID average - there was room for at least a 50bps cut. He warns that keeping rates high for too long could do more harm than good, as it stifles growth and job creation.

Despite this, Seeff notes strong demand in the property market, particularly in Cape Town’s luxury sector, where international buyers continue to invest. With stock levels declining, he anticipates price increases, especially in sought-after areas. He also highlights that mortgage lending conditions remain favourable, further supporting market activity.

Dr. Andrew Golding, CEO of Pam Golding Property Group

Golding shares the disappointment of many homebuyers, noting that the unchanged interest rate will not provide the financial relief many were hoping for. However, he points to rising house price inflation—now at 6.22%, the highest since 2007—as a sign of growing confidence.

He also emphasizes that first-time buyer demand is rebounding, helped by the transfer duty adjustment. While economists remain divided, Golding believes that if inflation remains stable, SARB may reconsider its stance and introduce rate cuts later in the year.

Adrian Goslett, Regional Director & CEO of RE/MAX SA

Goslett views SARB’s decision as overly cautious, arguing that a rate cut would have helped offset the financial strain caused by the VAT increase and higher electricity tariffs. He advises buyers to seek financial guidance to understand affordability in the current climate and urges real estate professionals to provide more support during this period.

While he doesn’t expect interest rate hikes in 2025, he remains uncertain about the likelihood of further cuts, urging buyers and sellers to stay informed and work closely with market experts.

Tony Clarke, MD of Rawson Property Group

Clarke sees the rate hold as a win for market confidence, allowing buyers to plan without fear of sudden repayment increases. He highlights the increased transfer duty threshold as a major advantage for first-time buyers but warns that the VAT hike could impact construction costs and slow new developments.

Despite this, he believes affordability concerns will drive more buyers towards the resale market, potentially pushing up demand for well-located properties. For investors, the growing rental market presents opportunities, as many potential buyers may delay purchases due to economic uncertainty.

Bradd Bendall, Head of Sales at BetterBond

Bendall acknowledges the disappointment in the rate decision but points out that previous cuts have already boosted home loan applications, bringing activity levels back to pre-pandemic highs.

He remains optimistic that if inflation remains low, the next SARB meeting could bring the rate relief that consumers are hoping for.

Conclusion: Stability, But at What Cost?

While SARB’s decision ensures market predictability, many in the property sector feel it was a lost opportunity to stimulate growth. Rising property prices, favourable lending conditions, and increased transfer duty exemptions provide some optimism, but VAT increases and electricity hikes could limit affordability.

For now, buyers, sellers, and investors should remain cautious but proactive, keeping an eye on inflation trends and potential rate cuts later in the year.‍