Is low inflation and buyer confidence enough to offset SARB's interest rate hold?

The fact that inflation is under control, confidence has returned, and buyers are coming back into the market is a consolation for the South African property sector. 

On Thursday, the South African Reserve Bank’s Monetary Policy Committee decided to keep the policy rate unchanged, at 7%. Four members preferred to keep rates on hold, while two favoured a cut of 25 basis points. 

A cut would have been a welcome accelerant for the sector, but it did not detract from the fact that the sector is already seeing genuine shoots of growth, says Stefan Botha, director of Rainmaker Marketing.

He says the property market is never defined by a single rate call; rather, it is the series of cuts we have experienced up to this point that has shifted affordability, sentiment, and momentum in the right direction.

"With inflation moving favourably, I remain confident we will see another cut before the end of the year, which will add further fuel to this positive trajectory.”

The Fed's rate cut impact 

Rainmaker Marketing says the US Federal Reserve System’s (The Fed’s) rate cut certainly created a more supportive global environment, particularly for emerging markets like South Africa’s.

With that said, the global property marketing agency says the SARB has consistently proven itself to be independent.

“It doesn’t simply follow the Fed’s moves but instead bases its decision on South Africa’s own inflation dynamics and risks.

"Still, the Fed’s cut was positive for sentiment worldwide and gave our markets a bit more breathing room. While SARB’s decision was rooted in local fundamentals, the global backdrop created by the Fed’s move has provided an additional layer of support.” 

Botha says no single decision flips the property market overnight, but it is the momentum that really matters. “And at this point, momentum is firmly moving in the right direction. Buyers are more active again in key parts of the country, developers have returned, and banks are lending with more confidence.

“Yes, another cut would have added pace, but it’s not going to derail the recovery. Affordability has already improved thanks to the series of rate cuts over the past 18 months. Most importantly, there is a strong sense that we have been through the worst of the inflation and interest rate cycle, and now we are firmly on the downward side.

"Should we see another cut before year-end, it will be an added bonus-but the market is already in a positive phase of recovery.” 

Meanwhile, the decision to pause interest rate cuts did not come as a surprise for property expert Greg Dart, a director at the High Street Auction Company. He says location is now more important than ever for investment, with key hubs such as the Western Cape and parts of KwaZulu-Natal showing early signs of recovery and representing good options.

“This will position investors – especially those in the logistics and freight sectors and the broader industrial arena – to benefit should the much-anticipated trade normalisation between South Africa and the US emerge.” 

Affordability

Had interest rates remained at pandemic-level lows, the property market would probably be significantly more active today, says Siphamandla Mkhwanazi, FNB senior economist.

He says lower borrowing costs in 2020-2021 boosted affordability and demand, particularly amongst first-time buyers, leading to stronger house price growth.

“In contrast, current rates (though slightly reduced) remain well above those levels, making affordability relatively tight and buyer activity subdued. However, the market is recovering, albeit at a slower pace than it probably would under ultra-low rates,” Mkhwanazi says. 

Rainmaker’s suggestions for property sector stakeholders.

For potential buyers: Do not sit on the sidelines waiting for the “perfect” moment-the market does not wait for anyone. Conditions are improving, and in certain areas, prices are already rising.

If you are not yet ready to buy, use this time to strengthen your credit profile, secure pre-approval, and save. If you are ready, do not overthink it-interest rates are declining, and the opportunity is real.

For homeowners: The recent cycle has provided some breathing space. Now is the time to budget wisely, plan for the medium term, and even consider refinancing or restructuring debt where necessary. With the likelihood of another cut before year-end, there is reason to remain cautiously optimistic.

For real estate agencies: Lean into the sentiment shift. The fundamentals are improving, and momentum is gathering. Agencies that position themselves well and communicate effectively with buyers and sellers are the ones that will capture the upside of this recovery.

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