Rate cut offers relief, but growth remains elusive

Top Highlights

• SARB trims repo rate to 7%, easing home loan costs slightly
• Economic growth downgraded, property market recovery remains shallow
• Real interest rates still too high to drive investment momentum

Rate Cut Reality: Relief or Red Herring?

‍The South African Reserve Bank’s latest 25 basis point cut to the repo rate, bringing it down to 7.00%, offers modest but welcome relief for the residential property sector. With the prime lending rate dropping from 10.75% to 10.50%, homeowners with a R1.5 million bond over 20 years will save around R250 per month.

While the cut adds to the 1% cumulative reduction since SARB began easing in late 2024, the broader economic backdrop remains bleak. The Reserve Bank also downgraded its growth forecast, reinforcing the view that South Africa’s economy remains stuck in low gear, with limited consumer confidence and sluggish demand for property.

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“This rate cut is better than nothing, but it won’t move the needle in a stagnant economy. Real interest rates remain too high for meaningful investment in fixed capital like housing, infrastructure, or construction. We need a stronger policy shift to unlock growth,” Renier Kriek, Managing Director at Sentinel Homes

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Capital markets responded positively, with bond prices rising and yields falling. However, the Rand weakened, which could put upward pressure on import costs, potentially nudging inflation higher in the short term.

The Way Forward for Property Investors

‍For property investors, this is a moment to plan, not panic. The rate cut opens a narrow window to restructure debt, assess affordability, or prepare for strategic acquisitions. Yet, without broader economic reform and demand stimulus, the market will continue to favour buyers who think long-term and act decisively.

Opportunities may emerge in affordable housing, high - yield rental areas, and value-driven developments, but real upside will depend on future policy clarity and stronger GDP momentum.

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