Despite some improvement in market activity, the overall volume of real estate transactions remains approximately 18% below the expected level. Experts note that the inflation surge is temporary, whereas the impact of higher interest rates on the economy and the property market has proven to be more prolonged.
Samuel Seeff, chairman of Seeff Property Group, reported that in 2021, when the interest rate was around 7.25%, about 22,000 deals were registered monthly, while now, five years later, this figure has dropped to 18,000. He emphasized that this negatively affects both the property market directly and the economy indirectly.
High interest rates over the past five years have also directly limited young people's ability to purchase housing. According to market research, the number of young people aged 26–35 purchasing property has decreased by 25%, and the average age of buyers has increased to 36. Furthermore, the share of first-time buyers among mortgage applications has noticeably decreased by 10% (from 56% to 46%).
In Seeff's view, all these factors indicate an urgent need for the Reserve Bank to do everything possible to stabilize the rate to restore housing affordability and market confidence as quickly as possible. The property group insists that the central bank maintain the repo rate unchanged, despite speculation about a potential rate hike this week.
Seeff noted that the current repo rate is 7.00%, and the prime rate is 10.50% after a 25 basis point increase in May. He added that despite oil price volatility due to recent Middle East tensions, the average price is still 15–18% below the May average when the bank raised the rate. This creates room for a pause. Even if inflation is expected to rise to 4.7% in June, the projected annual figure remains slightly below the Bank's upper target band of 4%, giving the bank scope to make a more measured decision.
The chairman reiterated that the temporary inflation spike contrasts with the longer-term impact of higher interest rates on the economy and the property market. Restrictive monetary policy has contributed to economic stagnation, as the economy has been in a low-growth mode for several years. The property group believes that while oil price volatility is a key factor, high borrowing costs have become a serious obstacle to economic and housing market growth.
Additionally, Seeff mentioned that the bank itself, along with several financial institutions including the IMF and the World Bank, has lowered its GDP growth forecast closer to 1.1%, prolonging the stagnation.
Stefan Potgiter, CEO of BetterHome Group Mortgage Origination and BetterBond, stated that global uncertainty may delay but not stop interest rate easing. He noted that despite South Africa's improving economic fundamentals, the escalation of the situation in the Middle East may force homeowners to wait longer for reductions in monthly mortgage payments.
According to the July BetterBond report, there is an improvement in the domestic outlook, supported by stronger GDP growth, falling fuel prices, and early signs of slowing inflationary pressure. An Investec comment also indicated that the change in food weights in the Consumer Price Index means that food price shocks are likely to have less impact on overall inflation than before, supporting a more favorable inflation forecast and improving prospects for future repo rate cuts. Moreover, the rand remained stable in recent months, trading about 8% stronger against the US dollar than a year ago, which helped curb imported inflation, although sustained oil price increases could negate some of these advantages.
Resilience is also visible in the property market: BetterBond data showed that despite the 25 basis point repo rate hike in May to 7%, mortgage application volumes remain high, exceeding figures from two years ago by 5.7%.
However, BetterHome warns that the renewed conflict in the Middle East has heightened global economic uncertainty. Higher oil and commodity prices could affect global inflation, while rising electricity costs continue to put pressure on local prices. These factors may prompt the Monetary Policy Committee (MPC) to adopt a cautious approach at this week's repo rate meeting.
Economists are divided on the possible outcome. Some, including Bank of America, expect a 25 basis point repo rate hike because inflation exceeds the Reserve Bank's preferred target range. Others believe the Reserve Bank has done enough to curb inflation and would prefer to keep rates unchanged while monitoring global events and local risks. Although rate cuts may take longer, the overall fundamental indicators of the property market remain strong. Deon Labushagne, a property specialist at RealNet RainMaker, noted that domestic inflation is stabilizing locally, the rand is showing good resilience, and buyer demand remains high in the housing market despite higher borrowing costs. He added that global headwinds include Middle East tensions and rising global oil prices, as well as local electricity tariff increases, keeping inflation risks under control. Most economists predict that the Reserve Bank will maintain interest rates at their current level for now to monitor global volatility, rather than cutting them immediately.
