The recent interest rate cut could be a watershed for the SA residential property market, strengthening consumer confidence and sparking demand for homes in Johannesburg which have been selling below the national average.
The Reserve Bank trimmed its repo rate by 25 basis points last Thursday, bringing the benchmark to 7.5%. The reduction brings welcome relief to the residential market, making home loans more affordable and providing first-time buyers with more cost-effective options.
“While each cut may seem small, the impact adds up — on a R1m home loan, the total reduction, taking into account a third rate cut today, translates to R515.19 less in monthly instalments,” said Herschel Jawitz, CEO of Jawitz properties.
“If you factor in lower fuel prices and lower inflation, consumers will start to feel that there is some money left over at the end of the month.”
Jawitz said an improvement in the financial climate, coupled with rising consumer and business confidence, was set to benefit all segments of the residential market.
“Lower interest rates are good for buyers and investors, and with improved affordability, rental escalations will increase. Factors such as sentiment will have a positive impact on the upper end of the market as well as the leisure and lifestyle market,” he said.
Jonathan Kohler, CEO of Lansdowne Property Group, said the most recent rate cut was a positive shift in market sentiment for the property market and Johannesburg in particular, where prices have been stagnant for several years.
“The 25 basis-point interest rate cut is a positive step for the property market, particularly in Johannesburg, where lower rates unlock significant value,” Kohler said.
“The cumulative 75 basis-point reduction... is a meaningful shift. Not only does this improve market sentiment, but it also enhances affordability, potentially sparking an uptick in buying activity.”
Kohler said the recent rate cuts were especially beneficial for first-time buyers, making property ownership more appealing as rental costs move closer to bond repayments.
This trend is particularly noticeable in one-bedroom or studio apartments, where lower levies and taxes are helping shift from a renter’s to a buyer’s market. As interest rates drop, affordability improves, especially for buyers in the lower price range, offering better value in Johannesburg.
Toni Anderson, head of home services at Standard Bank, also noted that Johannesburg’s housing market, which endured price declines throughout 2023, was showing signs of stabilisation.
“The combination of easing consumer inflation and the latest rate cut — with an additional 25 basis-point reduction anticipated in March — could drive real-term house price growth in 2025,” she said.
“With affordability improving, this cut is expected to create a more favourable borrowing environment, providing buyers and sellers an opportunity to lock in benefits before rates stabilise.”
Pam Golding CEO Andrew Golding said the prospect of further interest rate cuts remained uncertain because of executive orders from the administration of US President Donald Trump. These led to a reassessment of expectations, with initial predictions of three 25 basis-point cuts now down to just one expected later this year.
Golding added that there had been a rise in sales activity, especially among first-time buyers, who were most affected by interest rates.
Home finance experts ooba Home Loans reported a recovery in first-time buyer demand in the second half of 2024, with strong growth in Mpumalanga, Johannesburg, and in the east and south of Gauteng.
Banks were also supporting the market with improved concessions across all regions in 2024, he said.
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