Welcome Tailwinds for the Property Market

Recent economic developments are likely to be positive for homeowners and property investors. The removal of South Africa from the Financial Action Task Force grey list and the government’s decision to lower the inflation target to 3%, as stated by Finance Minister Enoch Godongwana in his Mid-Term Budget Policy Statement, were contributing factors to an upgrade of our credit status by credit rating agency S&P Global. More good news is that the SA Reserve Bank (SARB) decided at its last Monetary Policy Committee (MPC) meeting to lower interest rates by a quarter of a percent.

Adrian Goslett, CEO and regional director of REMAX Southern Africa, says the recent decisions by the SARB to lower the inflation target rate and by S&P Global Ratings to upgrade South Africa’s credit rating indicate a cautiously promising market for property investors.

“The decision by S&P Global Ratings is likely to boost foreign investor confidence and capital in South Africa,” Goslett says, “supporting economic growth, job creation, and overall stability, positively influencing consumers and market performance.”

He notes that with stronger credit ratings and a commitment to long-term price stability, we can see a healthier market environment developing over time. “Improved economic confidence usually results in more affordable conditions, increased buyer activity, and stronger returns on investment,” he says.

Goslett and other commentators voiced concerns that the lower inflation target might mean the SARB would be more cautious in lowering interest rates, resulting in higher rates for longer. These concerns were partly assuaged when, at its meeting on Thursday, 20 November, the MPC dropped the repo rate by 0.25% to 6.75%.

Commenting on the rate cut, Bradd Bendall, national head of sales at bond originator BetterBond, said it would bring a welcome reprieve to homeowners. “The decision means the repo rate has dropped a cumulative 150 basis points since November 2024,” Bendall said. “The cut is expected to further improve affordability and access to credit, giving buyer confidence a welcome boost as we head into the festive season.”

BetterBond’s latest data points to a residential property market that is steadily gaining momentum. Home loan applications have increased by 30% over the past two years. The proportion of home loans granted to first-time buyers is 17.4% higher year-on-year, an important indicator of market recovery.

CEO of FNB, Harry Kellan, was also upbeat about the interest rate announcement. “We welcome the Reserve Bank’s decision to further cut the interest rate, as this will further lift consumer and business confidence. While inflationary pressures persist from administered prices such as electricity and water, we are seeing stability and even falling prices in other key inflation drivers, notably the price of fuel. The lower borrowing costs continue to provide relief for consumers, but it’s equally important for them to use this period wisely to manage debt and build up savings where possible” he said.

Kellan says consumers should consider maintaining their repayments at present levels, if their budgets allow, rather than reducing them in line with the lower rate. “The saving on interest costs over the term of the home loan will be significant,” he says.

On the S&P rating upgrade, Darren Brander, managing director of law firm STBB, says it represents “a critical moment for foreign direct investment in real estate”.  Quoted in a blog by STBB’s Samantha Smith, Brander notes: “An upgrade enhances the regulatory and financial environment underpinning property transactions. Validating sustained fiscal discipline and regulatory reform, an upgrade signals to investors that South Africa is a credible, low-risk destination for long-term capital.”

“It goes without saying that investors seek stability and predictability, especially concerning long-term property investments where financing horizons can extend decades,” Brander says.

Crucially, reduced risk could ease pressure on borrowing costs, for both the government and private sector, resulting in cheaper financing for large-scale residential, commercial, and industrial projects. “Ultimately, this cost advantage can then feed into more competitive pricing or stronger returns, which heightens the appeal of investing in South African property,” Brander says.