Experts forecast stronger property market performance in 2025

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) has decided to reduce the repo rate by 25 basis points, with effect from 31 January 2025.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, said he latest adjustment provides some much-needed relief for South African consumers and is expected to have a positive impact on the local property market.

“Following previous rate cuts in September and November, this additional adjustment positions the property market for potentially more favourable conditions in the months ahead, keeping in mind that the impact of an interest rate reduction typically becomes evident a few months after the market has had time to adapt to the change,” he said.

This cut will also help mitigate some of the potential risks that face the South African economy following Trump’s recent inauguration.

His appointment introduces new uncertainties and potential shifts in global economic policies, which could indirectly affect the South African economy and real estate market, said Goslett.

“If inflation increases as a result of his global trade policies, we might see the South African Reserve Bank tighten their stance around interest rates to keep inflation under control. Investors might also adopt a “wait and see” approach until Trump’s policy decision become clearer. If this is the case, it could have a negative impact on the local property market,” Goslett said.

But, for now, Goslett remains optimistic about how the property market will perform in the year ahead.

“Despite the challenges that the year presented, we closed 2024 with a record-breaking R4.1 billion in registered sales during December, complemented by an additional R3 billion in reported sales. If 2024 ended on such a high note, 2025 holds immense potential for growth and success within our network, and possibly for the greater market overall,” Goslett said.

Samuel Seeff, chairman of the Seeff Property Group said a 50bps cut would have been far more meaningful adding that more interest rate relief is needed to get the market back to the volumes of two years’ ago.

“Nonetheless, it is a good time for buyers to get into the market and find good value, especially in Gauteng and inland provinces where stock levels are still high.”

If the economy remains stable, with more growth, then on the whole, Seeff believes the property market should perform considerably better compared to last year.

Areas operating from a low base such as Gauteng could see good growth with increased sales volumes. Once stock levels start coming down, prices can then finally start rising more meaningfully, he said.

Seeff believes the Western Cape, and most coastal areas which performed better last year compared to the inland areas will likely continue its good performance.

Many areas in the Cape especially are already seeing low stock levels, and prices could again rise at inflation-topping levels.

Dr Andrew Golding, chief executive of the Pam Golding Property group said 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.

“Sales activity nationally is experiencing an uptick, with increased activity among first-time buyers – the most sensitive to interest rates – evident in the marketplace.”

According to ooba Home Loans, there is clear evidence of a recovery in first-time buyer demand during H2 2024, with notably strong growth in demand in Mpumalanga, Johannesburg and Gauteng South and East.

Golding noted that the banks continue to support the housing market, with the average (weighted) concession relative to prime improving across all regional markets in 2024.

The demand for investment or buy-to-let properties surged to 15.1% of applications in December 2024, according to ooba, with investment demand averaging 12.6% of applications last year – up from 10% in 2023.

“While investment demand rose in most regions during the course of last year, this remains concentrated in the Western Cape, with 38.8% of all applications in December 2024 reflecting this demand.”

From a Pam Golding Properties perspective, the increased activity in the residential property market is borne out by the fact that November and December 2024 were busy months, with our group sales well ahead of transactions concluded in Nov/Dec 2023.

For the local housing market, the recovery in house prices continues to gather momentum and become more broad-based. While the Western Cape remains the primary engine of the recovery, having consistently outperformed the national market during the past five years, the rebound in house prices has spread to most other regions as pressure on household finances eases.

According to the Pam Golding Residential Property Index, national house price inflation has risen steadily from below 2% in late 2023 to +5.1% in December 2024.

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)

The argument for a 50bps rate cut this week

The property sector has come out in strong support of a robust and decisive interest rate cut.

Samuel Seeff, chairman of the Seeff Property Group says the Reserve Bank must consider a minimum 50bps this week to counter the rising growth and unemployment risks.

“The time to be bold is now. We have the highest real interest rate in the world, while the economy is limping along and barely growing. Meanwhile unemployment has climbed to an astronomical 32%, higher when other factors are considered.”

Economists anticipate that the South African Reserve Bank will reduce interest rates by 25 basis points at the conclusion of its monetary policy meeting this week, bringing the repo rate to 7.50% and the prime rate to 11%.

If implemented, this would mark the third consecutive rate cut, following a total reduction of 50 basis points in the Reserve Bank’s previous two meetings in 2024.

Seeff said it makes no sense for the bank to persist with an interest rate policy concerned about inflation at between 3% to 6% when, clearly, the most important element for the country must be GDP growth, and with that greater employment.

Another 25bps rate cut is simply not going to provide the urgent growth boost that is needed, said Seeff. While the bank will likely look to protect the exchange rate, and be concerned that if the US does not drop its rate and we do, people may shift money there, and inflation may go up due to the weaker exchange rate, he said there is a strong counter-argument.

“We need GDP growth and unemployment to decrease, and you cannot do it with these high interest rates. Not addressing the growth and unemployment crisis poses a far greater risk to South Africa.”

Seeff pointed out that the bank has previously stepped in to provide interest rate relief during the Covid-pandemic, and should do so again. “The risks are simply far bigger than protecting the exchange rate. The biggest risk right now is not inflation, but low to no growth and rising unemployment.”

Cuts will be good for the economy, the country, and property market, he said. “It will also be good for reinvestment stimulation. If the economy grows, you may very well have the offset between those who are not investing in South Africa or who, because of our weak interest rate return, might be motivated to rather invest in a growing South Africa.”

“The exchange rate may then, in fact, get stronger again, so it’s not guaranteed that an interest rate cut will do damage to the exchange rate.” Seeff also expressed concern that there seems to be an appetite to keep the interest rate higher for longer with only two rate cuts of 25pbs each this year.

He reiterated that there needs to be at least four cuts of 25bps each, kickstarting with a 50bps cut this week.

“We have seen a pickup in momentum in the property market off the back of the two rate cuts late last year, and that momentum needs to continue. It should be encouraged and pushed, and can only be done with a lower interest rate. Now is not the time for a conservative approach in South Africa, the Reserve Bank needs to be bold,” Seeff said.