South Africa’s residential property market is likely to encounter a turbulent period due to the South African Reserve Bank’s (SARB) decision to maintain its hawkish stance on interest rates.

Landsdowne Property Group, one of the largest residential real estate managers and estate agencies, says that rising living costs and the upcoming VAT hike could put the brakes
on positive momentum in the residential property market.

Jonathan Kohler, Founder and CEO of Landsdowne, said: “In an environment of rising living costs, affordability remains a major factor. The MPC’s decision to hold interest rates and concerns over economic growth will likely impact investor sentiment in the short term, as buyers adopt a wait-and-see approach.”

Kohler also noted that many potential buyers might decide to continue renting rather than purchasing, as a fixed-cost lease offers greater financial certainty in an uncertain economic climate.

However, he pointed to an adjustment in transfer duties that could stimulate buying activity in the more affordable property segments. Starting from 1 April 2025, properties valued up to R1.210 million will be exempt from transfer duty, an increase from the previous threshold of R1.1 million.

“This adjustment marks a significant and welcome shift for the property market, especially in the secondary sector. By boosting affordability in the lower- to middle-income brackets, we foresee heightened interest from first-time buyers and upward momentum across various property segments. This move has the potential to drive market activity and benefit both buyers and sellers,” Kohler said.

He further stated that the higher-end property market may not be as significantly impacted by the rise in transfer duties, as buyers in this segment typically have more financial flexibility.

Despite these concerns, investor confidence in the South African property market remains strong. The Absa Homeowner Sentiment Index for the fourth quarter of 2024 revealed that 85% of investors are optimistic about expanding their portfolios — the highest level of investor confidence since 2016.

“Expectations of stable or lower inflation and further interest rate cuts in May and possibly later this year are expected to continue to drive property investment, but at a slower pace. Savvy investors will want to lock in value now. Gauteng in particular offers exceptional value for money, as house prices have remained stagnant for almost a decade.”

The decision by MPC to maintain the interest rate at 7.50%, with the prime lending rate at 11%, has drawn criticism from several industry leaders, who argue that it was a missed opportunity for economic relief.

Samuel Seeff, Chairman of the Seeff Property Group, described the decision as “disappointing, and a missed opportunity to provide vital relief to consumers and property buyers, and a boost to the economy.” He pointed out that the US Federal Reserve had also kept interest rates unchanged, yet there were compelling reasons for the SARB to cut rates to stimulate growth.

“The news that inflation remained 3.2% for February provides further support that there is a window of opportunity given that inflation remains contained near the bottom of the Bank’s inflation target range while the currency has remained fairly stable,” Seeff added.

He said that the current interest rate is still 100 basis points higher than the pre-Covid level, despite inflation having decreased significantly. The high rate is, according to Seeff, “doing more damage than good to the economy, especially when it needs vital stimulus to boost growth and job creation.”

Despite these concerns, Seeff acknowledged that the property market had seen an uptick in activity this year, with sales volumes increasing and buyers taking advantage of favourable mortgage lending conditions.

Dr. Andrew Golding, CEO of Pam Golding Property Group, also weighed in on the MPC’s decision, calling it “disappointing for existing mortgage holders and aspirant home buyers.” With inflation at 3.2% in February 2025, below market expectations, many had hoped the SARB would lower rates to ease financial pressure on homeowners and prospective buyers.

Golding added: “While economists were divided ahead of the MPC decision, some argued that given the sluggish state of the local economy, real (inflation-adjusted) interest rates are too high, suggesting scope for further interest rate relief.”

However, there is a bright spot in the property market’s recovery. The Pam Golding Residential Property Index shows a steady rise in national house prices, which increased by +6.22% in February 2025, marking the strongest growth rate since late 2007.

Golding noted that growth in house prices has accelerated across the major regions, particularly in the Western Cape, where house prices rose by 6.04%, and Gauteng, where they grew by 4.5%.

He also highlighted the recovery in first-time buyer demand, as evidenced by the rise in home loan applications from first-time buyers.