Daily Archives: January 30, 2025

Why the latest rate cut is a significant shift for South Africa’s property market

The property industry has welcomed the latest rate cut by the SA Reserve Bank’s monetary policy committee (MPC), calling it a significant shift that will likely improve market sentiment and potentially spark an uptick in buying activity.

SARB cut interest rates by 25 basis points on Thursday with the country’s prime rate now 11.00%, from 11.75% as recently as early September last year.

For a new R2 million home loan at the prime rate, monthly repayments have now decreased by approximately R1,000.

Landsdowne Property Group pointed to a likely significant positive shift in market sentiment for the property market and especially the Johannesburg market which needs rejuvenation.

Jonathan Kohler, Founder and CEO of Landsdowne said: “The cumulative 75 basis point reduction, which amounts to three quarters of a percent is a meaningful shift. Not only does this improve market sentiment, but it also enhances affordability, potentially sparking an uptick in buying activity.

“Each interest rate cut improves perceptions of the market and increases people’s willingness to purchase property. These reductions are exactly what Johannesburg needs to see a return of market activity.

Dr Andrew Golding, chief executive of the Pam Golding Property Group said the cut is encouraging for aspirant home buyers and those with existing mortgages, particularly as the outlook for interest rate relief has shifted significantly during recent weeks.

This is the third consecutive interest rate decrease, following reductions of 25bps at both the September and November 2024 MPC meetings, bringing the total interest rate relief in this current downward cycle to 75bps.

Golding said that although this month’s (January 2025) rate cut was widely anticipated, the outlook for interest rates for the remainder of the year is far less clear with opinions ranging from no further interest rate relief to one single cut of 25bps. “However, the timing of any further rate cut is also debated with some commentators suggesting March 2025 and others later in the year.”

This would make the current interest rate-cutting cycle unusually shallow, he said. This is largely a reflection of the heightened uncertainty in the current global economy amidst concerns of a resurgence in inflationary pressures which is making many central banks – and the SA Reserve Bank in particular -cautious.

“The stream of executive orders from the US White House is also creating uncertainty, prompting a reassessment of the likely scope for further interest rate cuts in the United States, which has shifted from initial expectations of three 25bps rate cuts to a single cut later this year.

“Fewer US interest rate cuts leave less space for local interest rate relief, and any further rate cuts will be dependent on developments both globally and locally,” said Golding.

Notwithstanding this potential uncertainty sentiment has improved, in general, with the previous two repo rate reductions of a cumulative 50bps in 2024 already creating a ripple effect across the residential property market – increasing uptake, particularly in the lower to middle sectors of the market, while also boosting confidence and activity in the luxury market, according to the agency.

Samuel Seeff, chairman of the Seeff Property Group said the latests cut was simply not enough.

A 50bps cut would have been far more meaningful, he said, adding that there was adequate support for the Reserve Bank to counter the economic stagnation and unemployment risks with a more robust cut.

“The country can no longer afford what is effectively the highest real interest rate in the world – differential between the interest rate and inflation – while the economy is limping along, barely growing, and unemployment is spiking.”

As a result of the 25bps rate cut, mortgage repayments will reduce by:

– R750 000 bond – from R7 869 to R7,741– thus saving R128
– R900 000 bond – from R9 443 to R9,290 – thus saving R153
– R1 000 000 bond – from R10 493 to R10,322 – thus saving R171
– R1 500 000 bond – from R15 739 to R15,483 – thus saving R256
– R2 000 000 bond – from R20 985 to R20,644 – thus saving R341
– R2 500 000 bond – from R26 231 to R25,805 – thus saving R426
– R3 000 000 bond – from R31,478 to R30,966 – thus saving R512
– R5 000 000 bond – from R52,463 to R51,609 – thus saving R854

(Based on a 20-year repayment period at the prime rate)

Reserve Bank cuts interest rates by 25 basis points

The South African Reserve Bank (SARB) has reduced the interest rate by 25 basis points, bringing the repo rate to 7.50%.

This decision from the Monetary Policy Committee (MPC) aligns with expectations, as the country’s inflation continues to ease.

Four members of the MPC voted in favour of the rate cut, while two opted to keep rates unchanged.

Inflation in South Africa stood at 3.0% in December, well below the SARB’s midpoint target of 4.5%.

The central bank expects inflation to remain under 4.5% in the first half of the year, although it may rise to around this level later in the year, with core inflation staying within the target range.

Reserve Bank Governor Lesetja Kganyago said inflation appears well contained in the near term.

“However, the medium-term outlook is more uncertain than usual, with material risks from the external environment. Domestic factors such as administered prices are also problematic.”

Inflation expectations continue to align with the SARB’s target, though risks to the inflation outlook remain on the upside due to global factors.

Looking ahead, the SARB forecasts GDP growth of 2.0% by 2027, despite ongoing challenges in the mining and manufacturing sectors, which are still struggling to return to pre-COVID-19 levels.

As growth picks up, the central bank expects improvements in both the primary and secondary sectors, alongside increased investment.

With inflation currently at the lower end of the SARB’s target range, South African consumers can expect further rate cuts in the near term. This would bring the total reduction in interest rates to 0.75% since September 2024.

For consumers, the immediate effect of this cut would be a reduction in monthly debt repayments, including home loans, car loans, and credit card payments.

For example, a 0.25% rate cut would lower the monthly repayment on a R1 million home loan by R515.19.

Commenting on the broader economic sentiment, Herschel Jawitz, CEO of Jawitz Properties, noted that the shift in sentiment since the May 2024 elections, combined with improvements in power supply and lower inflation, has positively impacted the residential property market.

Areas like Gauteng, which had experienced oversupply and stagnant prices, are seeing increased buyer demand. While it may take time for this to result in price growth, further interest rate cuts are expected to fuel positive momentum in the market.

‘Durbs by the sea’ fuels R5 billion economic surge over festive season

Durban has yet again stamped its status as a premier holiday destination, with the city’s tourism profile proving to be of great economic benefit to the local community. 

This week, the eThekwini Municipality announced the findings of a socio-economic assessment on the festive season’s impact on the city. 

The in-depth report, conducted by BDO South Africa, an independent accounting and consulting firm, highlighted the significant economic benefits generated during the 2024/25 festive season, which spanned from 1 December 2024 to 12 January 2025. 

According to the assessment, the 2024/25 festive season resulted in a direct spend of R1.95 billion within eThekwini Municipality, showcasing a strong demand from both domestic and international visitors.

“The total economic contribution to the local economy was an impressive R4.83 billion, illustrating the multiplier effect of the tourism sector. The festive influx also contributed about R360 million in revenue to the government, further highlighting the important role tourism plays in local and national economies,” the municipality said. 

The city said this wave of tourism created or sustained approximately 8 716 jobs, offering vital employment opportunities for residents in various sectors, including hospitality, retail, transportation and entertainment. 

“The job creation underscores tourism’s role as a crucial pillar of the local economy, providing livelihoods and supporting families,” the municipality said. 

Over 800 000 visitors

The festive season has also attracted a total of 875 289 visitors to Durban, including 447 832 domestic overnight visitors, 33 577 foreign overnight visitors, and 393 880-day visitors. 

A survey of visitors revealed that 79% perceive Durban as a prime tourist destination. 

Visitors participated in various activities, with the top attractions being the city’s breathtaking beaches (73%), local eateries (69%), and shopping experiences (64%). 

Notably, 54% of visitors were drawn to uShaka Marine World, highlighting the city’s diverse offerings that cater to all ages and interests.

The economic impact assessment further acknowledged the significant contributions of major events held throughout the city, including Beach Paradise, Fact DBN Rocks, Anywhere In Your City and the uMgababa New Year Picnic, played a substantial role in attracting thousands of attendees, and contributed in driving the local economy during the 2024/25 festive season. 

“The festive season saw an average overall occupancy rate of 69%, with hotels reaching 72%, a notable increase from the previous year’s 70%.

“Peak occupancy rates reached 91% during the Christmas long weekend, illustrating the high demand and the city’s appeal as a festive getaway,” the municipality said. 

Looking ahead

The municipality said Durban’s tourism sector continues to demonstrate resilience and growth, with significant opportunities for future development. 

The municipality said the insights from the report will guide the city’s strategic initiatives to enhance visitor experiences and maximise economic benefits for communities. 

EThekwini Municipality mayor, Cyril Xaba said the city remains fully committed to working with stakeholders to ensure the continued growth of the tourism sector.

Durban Tourism will also be implementing a series of impactful initiatives designed to accelerate tourism growth.

Old Mutual’s new bank preps for launch with plans to introduce home loans

Clarence Nethengwe’s appointment as CEO of Old Mutual’s new bank, OM Bank, has been approved by the Reserve Bank’s Prudential Authority.

Nethengwe’s appointment as the country’s newest bank’s CEO is effective immediately, Old Mutual announced on Thursday, 30 January.

The bank, set to launch in 2025, will start with 200 selected customers in the first quarter, expanding to 8,000 by mid-year. OM Bank, a “digital-first” entity with no more than 600 staff, will initially offer transactional accounts, unsecured loans, and insurance, with value-added services like bill payments to follow.

Old Mutual has invested around R3.2 billion to establish the bank, leveraging a ready-made core banking system from 10x Banking. The concept of OM Bank traces back to 2007 when Old Mutual Finance was founded, and its evolution into a bank follows Nethengwe’s vision of providing integrated financial services.

The bank will target lower- to middle-income earners, focusing on the mass market where growth is most prominent.

While OM Bank won’t initially offer business banking or home loans, these are plans for the future.

Nethengwe told Fin24 that the bulk of OM Bank’s customers will likely earn between R10 000 and R80 000 per month, with about 85% earning between R10 000 and R40 000 per month.

“When you look at Old Mutual customer base in South Africa, almost, we were about 6 million customers in our insurance businesses, more than 60% of what we call the mass market customer,” he said.

“These are people who earn between R8 000 and R30 000 per month. We believe that will ultimately be replicated across OM Bank.”

Although OM Bank won’t offer business banking at launch, Nethengwe has confirmed that it’s a potential area for future expansion. Home loans will also be introduced eventually, though Old Mutual already provides mortgage services through a partnership with SA Home Loans, which handles the back-end administration while funding comes from the insurance group’s balance sheet.

“Our focus now is to build a very strong retail franchise first,” he says. “The business case is to offer home loans later, but there is a gap in the market for people who don’t earn enough for a home loan but earn too much to get an RDP house.”

Despite strong competition from established players like Capitec, Nethengwe is confident that OM Bank’s solid foundation, built on Old Mutual Finance’s R16 billion lending book, will drive its success. While OM Bank aims to break even by 2028, experts believe a more realistic target would be 2030.

OM Bank’s digital-first approach aims to make banking more accessible, particularly for underserved populations.

South Africa expected to cut borrowing costs

Recent signs of recovery from key infrastructure sectors like Eskom and Transnet, and an improvement in inflation figures, brings cause for hope for South Africa’s economic climate in 2025.

Inflation rates are falling, and many expect that South Africa could see further interest rate cuts this year. Add to that the possibility of a quicker exit from the grey list and a recovering property market, and it’s clear that the outlook for 2025 is far brighter than it has been in recent years.

The South African Reserve Bank is expected to cut borrowing costs by 25 basis points on Thursday, despite concerns that uncertainty around US monetary and trade policies could limit future rate cuts.

Economists in a Bloomberg survey predict Governor Lesetja Kganyago will lower the benchmark interest rate to 7.5% at a press briefing near Johannesburg. Most anticipate the six-member monetary policy committee will unanimously support this decision, following the same reduction as in previous meetings.

Old Mutual’s chief economist Johann Els attributes the rate cut to South Africa’s low inflation and minimal local inflationary pressures. Annual inflation has stayed below the central bank’s 4.5% target range since August, reaching just 3% last month.

In an interview with Moneyweb, Adriaan Pask, chief investment officer at PSG Wealth, noted recent positive developments in the country, particularly at Eskom and Transnet, as signs that the country is moving in the right direction.

While not yet perfect, these improvements are tangible, and is starting to unlock value in the market. As investor sentiment improves, capital flows into South African markets have begun to increase, which has had an immediate impact on valuations.

Pask stressed that the recovery is still fragile. There remain significant risks both globally and locally. The US fiscal system, particularly its high debt levels and the potential for rising borrowing costs are a concern, and while Wall Street has been strong, there are worries about the concentration risk within the ‘Magnificent Seven’ companies and the broader implications of a rising US debt ceiling.

Pask said that high interest rates and the growing cost of debt are starting to affect corporates, consumers, and the government,” said Pask.

Additionally, Pask highlighted China’s uncertain outlook. While the country’s valuation might present opportunities, he pointed to the fragilities in its real estate market and broader economic system as major risks.

In Europe, Pask believes there is potential for gradual improvement. However, investors are still cautious, focusing more on perceived risks than on opportunities that could come with lower valuations.

For South Africa, Pask said that if inflation continues to drop, the country’s GDP numbers could surprise on the upside, and if execution on key plans is successful, South Africa could enter a new phase of sustained growth.

The country, he said, is still in a recovery phase. He advised investors to continue diversifying their portfolios, as this strategy has proven to be crucial in navigating both local and global uncertainties.

He also advised investors to not fear market volatility but rather view it as an opportunity to buy quality assets at lower prices.

International buyers are flocking to South Africa’s best retirement spots

Real estate agents in the Western Cape and KwaZulu-Natal, particularly in high-demand areas like the Atlantic Seaboard and Umhlanga, are seeing an increase in viewing requests from international buyers.

These buyers are often referred by friends, family, or return visits, with many considering relocating to South Africa after the festive season.

An Austrian family recently purchased a R72-million holiday home in Silverhurst Estate, Constantia, Western Cape, after just one visit and a quick decision within 48 hours.

Meanwhile, a British retiree from the London Home Counties chose to invest in property in South Africa to enjoy year-round golf.

Rory Maritz, Co-Principal at Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs and False Bay, said these sales highlight South Africa’s growing appeal to international buyers.

He pointed to a French couple from Paris, who are purchasing a home in Cape Town sight unseen, offering more than the asking price, as another example of this trend.

Maritz noted that some buyers are looking for investment properties, while the majority seek holiday homes or permanent retirement residences.

Keri Culver, Senior Immigration Consultant at Xpatweb, noted a rising interest in South Africa’s Retired Person’s Visa – one of the most accessible visas of its kind globally – particularly among Europeans, British, Americans, and Canadians.

Recent data from the Department of Home Affairs (DHA) reveals that over the past four years, more than 5,000 applications have been received from individuals in more than 100 countries looking to retire in South Africa.

The most significant numbers of applications come from the UK, China, Germany, and the USA, with notable interest also coming from Switzerland, the Netherlands, and Sweden.

Dr. Andrew Golding, CEO of Pam Golding Properties, shared that since 2023, they have seen a rise in interest and completed sales to international buyers from a variety of countries, including the UK, Germany, Zimbabwe, the USA, Switzerland, Austria, UAE, France, Belgium, Nigeria, and other African nations.

The most sought-after locations for foreign buyers include Cape Town, the Boland and Overberg regions (such as Franschhoek, Stellenbosch, and Hermanus), the Garden Route (including Plettenberg Bay, Knysna, and George), and areas north of Durban, like Ballito. Gauteng’s upscale neighborhoods, including Fourways, Rosebank, and Sandton, are also attracting attention.

According to Rory Maritz of Lew Geffen Sotheby’s International Realty, there is growing demand from high-net-worth and ultra-high-net-worth individuals, particularly from the UK and Europe, for properties in the R20-million-plus price range.

The agency is also fielding inquiries from buyers in the US, as well as from more distant regions like Bermuda and the Cayman Islands.