SARB delivers first rate hike in three years

• SARB raises rates for the first time since 2023 as inflation, fuel prices and geopolitical tensions intensify pressure on consumers.
• Property leaders warn affordability pressures will rise, but believe South Africa’s housing market remains fundamentally resilient.
• Demand is shifting toward smaller, well-located homes as buyers prioritise convenience, transport access and financial stability.

South Africa’s residential property market faces renewed pressure following today’s announcement by the Monetary Policy Committee (MPC) to increase the repo rate by 25 basis points to 7%, bringing the prime lending rate to 10.5%.

The move marks the first interest rate hike since May 2023 and reflects the South African Reserve Bank’s (SARB’s) continued focus on containing inflationary risks amid heightened geopolitical uncertainty, rising fuel costs and persistent global market volatility.

While the increase was widely anticipated, the decision is expected to place additional strain on already pressured households grappling with:

• rising electricity tariffs,
• municipal rate hikes,
• fuel price increases,
• transport costs,
• and broader affordability pressure.

At the same time, however, many property leaders believe the market remains more resilient than expected, supported by competitive bank lending, semigration trends, housing demand and improving long-term confidence in property as an asset class.

Consumers under pressure

‍Rhys Dyer says the latest hike arrives at a difficult time for South African consumers.

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“While the increase places additional pressure on already strained consumers, the move was largely anticipated given rising fuel prices, municipal tariff hikes and increased electricity costs, all of which contributed to consumer price inflation climbing to 4% in April from 3.1% in March,” says Dyer.

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He notes that South Africa’s interest rate outlook remains delicately balanced as geopolitical tensions and elevated oil prices continue clouding the broader economic outlook.

The fragile ceasefire between the US and Iran has done little to calm global markets, with ongoing shipping disruptions and elevated energy costs continuing to drive inflationary concerns globally.

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“Locally, this is likely to translate into further petrol price increases, adding to inflationary concerns and squeezing already constrained household budgets,” he adds.

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Banks continue supporting buyers

‍Despite rising rates, banks continue showing strong appetite for residential lending.

Dyer says financial institutions are increasingly offering:

• zero-deposit bonds,
• cost-inclusive loans,
• and higher-value lending structures

to help offset deteriorating affordability.

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“Our data shows that repeat homebuyers are increasingly opting for zero-deposit loans, while first-time homebuyers are also making greater use of cost-inclusive loans,” says Dyer.

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He adds that deposits averaged 8.3% of purchase prices for first-time homebuyers between January and April, while overall deposits averaged 12.4%.

At the same time, unemployment remains elevated at 32.7%, placing additional strain on younger consumers entering the market.

Yet despite this, Dyer believes the aspiration for homeownership remains strong, particularly among younger South Africans.

BetterBond: Market still holding firm

‍Bradd Bendall says the rate hike will increase affordability pressure, especially among lower- and middle-income households.

However, he notes that the residential property market continues showing resilience despite economic headwinds.

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“The housing market has continued to show resilience. We have seen steady growth in bond applications, with a year-on-year increase of 6.2%, while home prices for both first-time and repeat buyers have reached record highs,” says Bendall.

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He believes opportunities still exist for aspirant buyers, particularly within:

• new developments,
• sectional title markets,
• and properties below the R1.21 million transfer duty threshold.

Bendall adds that financially disciplined homeowners remain in a stronger position than during the more aggressive tightening cycle experienced through much of 2024.

Pam Golding: Demand shifts toward convenience

‍Andrew Golding says the latest increase is unlikely to derail market activity in the short term, although affordability pressure will continue intensifying.

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“Prime lending rates remain broadly in line with levels seen between 2016 and 2019, making the latest hike more of a moderate adjustment than a major tightening of financial conditions,” says Golding.

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He believes banks continue playing a stabilising role through competitive lending conditions and support for homebuyers. Importantly, Golding says rising transport costs and congestion are accelerating demand for:

• smaller homes,
• apartment living,
• and well-located residential nodes close to workplaces, schools and transport systems.

This trend is particularly evident in:

• Claremont,
• the Cape Town CBD,
• Rosebank,
• and other higher-density urban nodes.

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“Affordability pressures and traffic congestion were already driving this trend, and prolonged higher fuel costs will likely accelerate it further,” says Golding.

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He also believes companies may gradually soften office attendance requirements if commuting costs continue escalating.

Seeff warns against further pressure on consumers

‍Samuel Seeff says the latest rate hike places further strain on already pressured consumers and risks slowing the residential market recovery.
 
He believes much of the inflation pressure is fuel and energy driven, while demand for well-priced homes, lifestyle estates and coastal property remains resilient despite ongoing affordability challenges.

Tyson Properties: Buyers becoming more strategic

‍Neil Abernethy says buyers are becoming increasingly strategic and financially cautious within the current market environment. He notes that demand remains strongest in:

• lifestyle-driven regions,
• secure estates,
• coastal markets,
• and well-priced residential stock.

According to Abernethy, buyers are now placing greater emphasis on:

• energy efficiency,
• security,
• transport convenience,
• and long-term operating costs

rather than simply focusing on property size alone.

He believes realistic pricing and financial preparation will become even more critical as affordability pressures continue building.

High Street Auctions: Investors still active

‍Greg Dart says the latest hike may create caution in parts of the residential market, but investor appetite for quality property assets remains active.

Dart notes that periods of economic uncertainty often create opportunities for disciplined investors capable of taking a long-term view.

He says demand for:

• income-generating assets,
• residential rental stock,
• mixed-use opportunities,
• and distressed or repositioning opportunities

is likely to remain active despite higher borrowing costs.

According to Dart, experienced investors understand that property cycles are temporary, while quality real estate assets continue delivering long-term value.

A delicate balancing act

‍Today’s decision highlights the difficult balancing act facing the Reserve Bank. On one side:

• inflationary risks,
• fuel volatility,
• currency protection,
• and global instability

continue pressuring policymakers to act cautiously.

On the other:

• economic growth remains weak,
• unemployment remains high,
• and consumers are already under significant financial pressure.

Markets are currently pricing in the possibility of another 25 basis point increase before year-end, although much will depend on:

• Middle East developments,
• global oil prices,
• inflation trends,
• and international central bank policy decisions.

Property market still showing resilience

‍Despite today’s hike, South Africa’s residential property market continues showing surprising resilience. Banks remain supportive. Buyer demand remains active in key regions. Semigration continues driving coastal and lifestyle markets.
 
Rental demand remains elevated and many South Africans still view property as one of the country’s strongest long-term wealth-building assets.

However, affordability is clearly tightening. The months ahead are likely to reward:

• disciplined buyers,
• financially prepared investors,
• realistic sellers,
• and strategically positioned developments.

The era of easy affordability may be fading again, but South Africa’s property market is proving once more that resilience remains one of its defining characteristics.

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