South Africa’s property sector has expressed dissatisfaction with the Reserve Bank’s Monetary Policy Committee (MPC) decision to keep interest rates unchanged. Although the outcome was largely anticipated, industry experts believe it was a missed opportunity to enhance consumer confidence and stimulate economic activity while conditions remain relatively stable.
Key Takeaways
- Interest Rate Hold Disappoints Property Sector: The Reserve Bank’s decision to keep interest rates unchanged has been criticised as a missed opportunity to boost consumer confidence and economic growth. Higher borrowing costs will continue to make homeownership difficult for many South Africans.
- Foreign Policy Concerns Add to Economic Pressure: Experts warn that South Africa’s strained relationship with the United States and uncertainty around trade agreements like the African Growth and Opportunity Act (AGOA) could lead to further economic instability, putting additional pressure on the property market and broader economy.
- Rental Market Set to Benefit Amid Slower Home Sales: With affordability concerns pushing prospective buyers out of the market, the demand for rental properties is expected to rise, potentially leading to higher rental costs for tenants.
About Arcadia Finance
Get the funds you need with ease through Arcadia Finance. Choose from 10 trusted lenders, all fully accredited by South Africa’s National Credit Regulator. Enjoy a seamless loan process with zero application fees and options customized to suit your financial goals.
Many property analysts predict that the decision will slow demand for home purchases, shifting the market towards rental properties instead. For aspiring homeowners, this means another round of frustration as affordability remains a pressing issue. With high interest rates making mortgage repayments more expensive, fewer buyers will be able to enter the market, effectively sidelining many middle-class South Africans. At the same time, concerns are growing that without urgent adjustments to South Africa’s foreign policies, economic challenges could intensify in the months ahead.
Reserve Bank Maintains Cautious Approach Amid Global Uncertainty
During the announcement on Thursday, 20 March, Reserve Bank Governor Lesetja Kganyago emphasised the potential risks facing South Africa. His remarks reinforced the central bank’s traditionally cautious stance, where it prioritises stability over bold monetary moves.
With global economies navigating rapid policy shifts, particularly in the United States, the MPC voted 4-2 in favour of keeping rates unchanged. The Reserve Bank remains wary of external influences that could impact South Africa’s financial outlook, opting to maintain its conservative approach despite local economic indicators showing potential for relief. This decision, however, has been met with frustration from business leaders and investors who argue that the country cannot afford to wait indefinitely for stability in international markets while local economic growth stagnates.
Missed Opportunity for Rate Cut, Say Property Experts
Industry leaders have criticised the decision, arguing that South Africa’s economic conditions could have supported a reduction in interest rates. Samuel Seeff, chairman of Seeff Property Group, pointed out that key economic indicators—such as lower-than-expected inflation and relative stability in the rand—provided a strong case for a rate cut.
Seeff highlighted that current interest rates remain 100 basis points above pre-pandemic levels, making South Africa one of the few countries where the gap between inflation and interest rates is so wide. He argued that reducing rates by 25 or even 50 basis points would have given the economy a much-needed boost, encouraging investment, consumer spending, and job creation.
Keeping borrowing costs high for an extended period, he warned, could do more harm than good by stifling economic growth when stimulus measures are needed the most. For businesses already struggling under the weight of slow consumer spending and high operational costs, the refusal to cut rates feels like yet another nail in the coffin.
Mixed Implications for Homeowners and Buyers
Andrew Golding, chief executive of Pam Golding Property Group, noted that the near-term inflation outlook is favourable and could have justified a rate cut. While households are set to face financial strain from rising costs—such as Eskom’s electricity tariff increase, VAT adjustments, and tax hikes—some relief is expected from an 80-90 cents per litre petrol price reduction in April.
Golding suggested that these factors might have allowed the Reserve Bank to adjust rates towards a more neutral level of 7.25%. However, by keeping rates unchanged, new homebuyers are likely to face increased pressure, potentially dampening overall property demand. Prospective buyers, already grappling with higher living costs, will have to shelve their homeownership dreams yet again, as affordability remains out of reach for many.
For existing homeowners and property investors, there is some optimism. Golding pointed out that national house price inflation has shown consistent growth, rising from a low of 2.2% in late 2023 to 6.22% in February 2025. This represents the strongest rate of house price growth in South Africa since 2007.
The property market rebound has also outpaced consumer inflation, which increased from 2.8% in October 2024 to 3.2% in February 2025. This has resulted in six consecutive months of real inflation-adjusted house price growth, offering some reassurance to those already invested in the market. However, even as prices rise, the number of buyers who can actually afford homes is shrinking, making this growth bittersweet. A strong property market means little if it only benefits a select few.
Many first-time buyers underestimate the extra costs beyond the property’s price tag. From conveyancing to municipal charges, transfer fees on property can catch you off guard. Learn what you’ll need to budget for to avoid last-minute financial shocks.
Foreign Policy Uncertainty Adds to Economic Pressure
Some property analysts have raised concerns that the Reserve Bank’s decision was influenced by external uncertainties, particularly South Africa’s strained relationship with the United States.
There are growing fears over South Africa’s trade position, especially regarding its eligibility for preferential access to US markets through the African Growth and Opportunity Act (AGOA). Governor Kganyago acknowledged that losing this access was one of the key risks considered by the MPC when making its decision.
Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, stressed that South Africa’s unstable foreign policy is having direct economic consequences. She argued that the government’s approach to international relations is creating unnecessary risks for businesses and consumers alike.
The MPC’s reference to “global economic instability” was, in her view, a diplomatic way of acknowledging that South Africa is struggling to maintain a balanced relationship with major economic powers. Geffen warned that unless the government urgently revises its foreign policy stance, the economic outlook could deteriorate further, with ordinary South Africans bearing the brunt of the consequences.
The risk of further economic isolation could mean even tougher times ahead, with job losses, reduced investment, and a weaker currency all on the cards if the government does not shift its approach.
She called on the government to prioritise national economic interests over political agendas, stating that failure to do so would place the country’s financial stability in serious jeopardy. She further criticised policymakers for failing to act in the best interests of South Africans, instead choosing to engage in political posturing at the expense of economic growth. With every misstep in international relations, South Africa inches closer to an economic cliff edge.
Rate Cuts Expected Later in the Year
Despite the current rate hold, some economists anticipate that the Reserve Bank will introduce rate cuts once global economic conditions stabilise. While a minority of analysts believe this could happen as early as May, most expect adjustments to be made later in the year.
In the meantime, the higher interest rate environment is likely to weigh on consumer and investor confidence, leading to slower home sales. However, Berry Everitt, CEO of Chas Everitt International, noted that the demand for rental properties is expected to increase as prospective buyers postpone their purchasing plans in response to the challenging borrowing conditions.
The rental market, already experiencing a surge in demand, is likely to become even more competitive, forcing many renters to stretch their budgets further. With fewer buyers entering the market, landlords may take advantage of the situation, potentially driving up rental prices.
While the long-term outlook remains uncertain, the property sector will be closely watching both local and global developments in the coming months, hoping for a shift that could support a more favourable lending environment. Until then, South Africans looking to buy property will have to brace themselves for yet another period of financial uncertainty, as homeownership remains a distant dream for many.
Thinking of building your dream home from scratch instead of buying one? Knowing the true cost to build a house in South Africa helps you plan better and avoid nasty budget surprises.
Conclusion
South Africa’s property market remains in a challenging position, with high interest rates, economic uncertainty, and foreign policy risks creating a difficult environment for both buyers and investors. While some relief is expected later in the year if the Reserve Bank cut rates, the immediate outlook remains tough, particularly for those hoping to enter the housing market. With affordability concerns mounting and rental demand increasing, South Africans will need to navigate a complex financial landscape in the months ahead.
Fast, uncomplicated, and trustworthy loan comparisons
At Arcadia Finance, you can compare loan offers from multiple lenders with no obligation and free of charge. Get a clear overview of your options and choose the best deal for you.
Fill out our form today to easily compare interest rates from 19 banks and find the right loan for you.
