South Africa faces a decline in homebuying activity amid economic challenges

South Africa may see a dip in homebuying activity as consumers grapple with various economic challenges and rising household costs.

Although the tariff increases do not directly target South Africa’s residential property market, there will be some indirect implications as they will have an impact on economic slowdown, investor sentiment and inflation, says Bradd Bendall, the national head of sales at BetterBond.

“Tariff increases will affect major industries, such as the motor vehicle industry, which could hamper the country’s economic growth. Job losses in these industries as a result of the tariffs will reduce consumer spending power,” Bendall said.

He added that higher tariffs could also weaken the rand, making building materials more expensive. #

"This could lead to much-needed new residential developments being delayed or becoming more expensive, he said. 

However, Bendall said every stock market decline in recent years has been followed by recovery and even a new growth phase.  “We saw this in 2020 with the pandemic, where governments responded with fiscal support and low interest rates, which resulted in an unexpected market rebound in subsequent months.” 

The industries that have already been flagged as being at significant risk if the United States(US) 30% import duties are implemented next month are notably automotive manufacturing, steel and aluminium, and agricultural products, says John Loos, the senior economist for Commercial Property Finance at FNB.

He said should any of these sectors experience financial strain, the direct property risk would lie primarily with the manufacturing segment of industrial property and, to some extent, the logistics and warehousing component, particularly where export-dependent tenants may come under financial pressure.

“However, there is also a broader, indirect risk to the property sector stemming from the wider economic consequences of any export-related shock. Manufacturing is deeply interconnected with other sectors of the economy, which would also be affected to varying degrees.

"For example, household financial stability is crucial for residential property demand, as well as for retail consumption, which underpins the health of shopping centres.

"Therefore, if the large manufacturing sector were to experience significant job losses, this could reduce residential and retail purchasing power, impacting both the residential and retail property markets,” Loos said. 

In essence, the direct potential impact would be felt most in the manufacturing component of industrial property, and perhaps to a degree in warehousing, with broader indirect effects rippling through various segments of the property market due to the overall economic impact of such an export shock, he added. 

Furthermore, the senior economist said that while many agricultural products are produced on farms and fall outside of the urban commercial property market, any economic damage from disrupted agricultural exports could still indirectly affect urban property markets, especially in smaller centres whose local economies rely heavily on agriculture.

Loos said export-focused tenants that are heavily dependent on the US demand may likely seek to diversify into other global markets to mitigate risk.

Bendall said that while the US tariffs will have an effect on some local markets, South Africa has several key macroeconomic indicators pointing in the right direction that will help pave the way for sustained economic growth and more employment opportunities in the longer term. 

He said inflation is currently well within the 3-6% target range and there is no reason for the South African Reserve Bank(SARB) to hike the prime lending rate when it meets again at the end of this month.

“There is also talk of lowering the target band of the interest rate. Fortunately, the rand has remained firm, despite the announced intention to hike tariffs from the beginning of next month.

“The property market has repeatedly shown its resilience and remains an asset class that can offer reliable returns. BetterBond’s June Property Brief reported a 4% year-on-year increase in home loan applications for the 12 months to May 2025.

"This suggests that the property market is showing signs of growth amidst the geopolitical uncertainty that has marked the first half of 2025. As always, consumers are urged to budget wisely and avoid unnecessary debt during these uncertain times,” Bendall said.

Loos said another potential consequence of an export shock is its impact on the broader economy and, by extension, government tax revenue.

He said a reduction in revenue could widen the fiscal deficit, increasing the government's borrowing needs and putting upward pressure on bond yields. “Since bond yields influence property capitalisation rates, this could result in upward pressure on cap rates and, consequently, downward pressure on property valuations,” Loos said. 

Tariffs continue to dominate the headlines, but US Fed minutes have added a twist, says Bianca Botes, Director at Citadel Global on Thursday morning. 

She said only a few officials backed a July interest rate cut, with most citing inflation risks tied to US President Donald Trump’s tariff spree. “Markets now expect cuts later this year, but not imminently,” Botes said. 

According to Botes, the rand is trading largely rangebound as markets wait to see the outcomes of tariff negotiations leading up to August 1.

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