Good news for homebuyers in South Africa

The South African Reserve Bank (SARB) is widely expected to cut interest rates today (19 September), which would be welcome news for the local property market.

The SARB’s Monetary Policy Committee (MPC) is set to cut interest rates by 25 basis points, taking the repo rate down from its 15-year high of 8.25%.

The decision follows an improvement in the inflation outlook. Headline inflation dropped to 4.4% in August, which is below the SARB’s target of 4.5%.

Moreover, the rand is stronger following the formation of the Government of National Unity (GNU), with international investors pouring money into South African bonds.

The US Federal Reserve cut interest rates by a sizeable 50 basis points, in line with the most bullish of analyst forecasts. This gives the SARB’s MPC ample room to cut rates without impacting the interest rate differential.

Standard Bank, Investec, Nedbank, Bank of America, FNB and the Bureau of Economic Research (BER) all expect interest rates to be cut by 25 basis points, with further cuts expected in November and early 2025.

John Herbst, CEO of Fine & Country Sub-Sahara Africa (SSA), said interest rate cuts will likely invigorate the property market, especially in inland metros.

“As interest rates drop, we expect a surge in market activity, which could lead to a boost in property values. This is welcome news for homeowners and investors alike, particularly after subdued growth,” said Herbst.

The expected easing of monetary policy is anticipated to improve investor confidence, which should stimulate consumer spending and, in turn, boost economic activity.

This could result in a potential lift in average home prices.

“While the market has faced challenges in recent months, including inflationary pressures and external factors, the likely reduction in interest rates is set to create a more favourable environment for buyers and sellers,” said Herbst

“We believe this will benefit the residential market, especially in the premium sector, where recovery has been eagerly awaited.”

The group remains optimistic that the coming months will mark the start of a revitalised property market driven by enhanced affordability and improved market sentiment.

The time is now

Samuel Seeff, chairman of the Seeff Property Group, said interest rates have been too high for a long time and cannot be delayed any longer.

Seeff said that the higher-than-necessary rate is hampering economic and property growth.

He added that the economic outlook had improved drastically amid the rand’s strength, the JSE hitting record highs and an uninterrupted power supply for roughly half a year.

Seeff said that the economy really needs a 50 basis point cut—but that we should see at least 25 basis points of cuts this week. Another 25 basis point cut is expected in November.

“It is almost unthinkable that the SARB would remain tone deaf to the plight of the economy and consumers,” said Seeff.

Many first-time buyers struggle to enter the market, while middle-class homeowners have had to absorb bond repayments of up to R1,500 to R3,000 per month in addition to the higher cost of living.

There has also been a significant value erosion in the property market, with transaction volumes down by nearly 40% due to higher interest rates.

As price growth has stalled across several areas, including the Cape, Seeff said the market is now favourable for buyers. A rate cut will boost buyer demand, and buyers will also benefit from the current flat prices.

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