1008618412__20260503__0 The May interest rate increase landed hardest where affordability and borrowing capacity are most tightly linked to rates-the mainstream residential market, where it has raised repayments and tightened the amount buyers can qualify for.
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The July interest-rate decision will find South Africa’s property market as a two-speed market.
This is as the broader residential market remains under real affordability pressure, with higher borrowing costs weighing on finance-dependent buyers and a consumer already carrying a heavy cost-of-living burden, says Keegan Steyn, the founder for South Africa’s at Forbes Global Properties.
He adds that the pressure there is genuine and should not be understated.
“The top end of the market sits in a different position. Our clients are predominantly high-net-worth local and international buyers whose decisions turn far less on where the repo rate lands in any given month, and far more on the quality and rarity of the asset," Steyn says.
He added: "They remain aware of the wider economic picture but a marginal rate move rarely decides whether they proceed on an exceptional property. In several cases we're seeing the opposite: periods of uncertainty are read as buying opportunities by those with a long-term view."
What matters most to the latter segment is the direction of any single decision but the predictability of policy around it, the Founder says.
He adds that high-net-worth buyers take a long view, and certainty on the trajectory matters more to their conviction than 25 basis points in either direction.
“Ultimately, the Reserve Bank must balance inflation risks against a fragile growth outlook. From our perspective, the real question is how the decision-and the clarity of the reasoning behind it-shapes confidence within the luxury property market.”
In May, the Monetary Policy Committee(MPC) increased the interest rates by 25-basis-point taking the repo rate to 7.00% and the prime lending rate to 10.50%.
May interest rate increase landed hardest where affordability and borrowing capacity are most tightly linked
The international network of invitation-only real estate brokerages says the May interest rate increase landed hardest where affordability and borrowing capacity are most tightly linked to rates-the mainstream residential market, where it has raised repayments and tightened the amount buyers can qualify for.
It says that in the ultra-prime market the effect has been far more contained.
“Demand for exceptional homes continues to be driven by scarcity rather than credit, and while developers face higher financing and construction costs, high-net-worth buyers stay active when the right opportunity appears. The wider point is value. Even at the very top of our market-where trophy homes on the Atlantic Seaboard trade around R170,000 per square metre-a global buyer is paying a fraction of Monaco, London or New York for comparable calibre.”
On that measure a dollar stretches roughly three times further here than in London, and around six times further than in Monaco, the company says.
“That gap, at this level of quality and lifestyle, is the real story for both local and international buyers.”
Meanwhile, Ezra Rasethe, President and CEO, investRand says this upcoming interest-rate decision comes at a challenging point for South African households and the property market. He says annual consumer inflation increased from 4.5% in May to 5.0% in June, driven mainly by transport, housing and utility costs, and financial services.
“This means households are simultaneously facing higher living expenses and the increased cost of servicing debt following May’s interest-rate hike.”
According to investRand, for homeowners and property investors with variable-rate bonds, this resulted in an immediate increase in monthly repayments.
It adds that this also reduced the amount some prospective buyers can qualify for, particularly first-time buyers who were already operating within tight affordability margins.
However, investRand adds that the effects are not uniform across the property market. It says higher borrowing costs may delay some home purchases, but the underlying demand for well-located and affordable housing has not disappeared.
“Instead, some buyers are adjusting their expectations by considering smaller properties, sectional-title units and more affordable locations.
“Those who cannot yet qualify for homeownership are likely to remain in the rental market for longer. This continues to support demand for affordable rental housing, student accommodation and well-managed multi-let properties in locations where there is sustainable tenant demand,” Rasethe says.
The CEO says the important distinction is that the market is not experiencing an absence of demand-it is experiencing a constraint on affordability.
This creates pressure for buyers and developers, but it can also create opportunities for disciplined investors who focus on resilient demand, realistic pricing and sustainable cash flow, he says.
“Ideally, the Monetary Policy Committee should hold the repo rate at 7.00% while maintaining a cautious stance, Rasethe says.
He says a hold would provide the SARB with more time to assess the full effect of May’s 25-basis-point increase without placing additional pressure on indebted households, businesses and property owners.
“Monetary-policy changes take time to work through the economy, and another immediate increase could weaken affordability and economic activity further.”
However, investRand says the rise in inflation to 5.0%, together with continued fuel-price and global supply pressures, means the possibility of a further 25-basis-point increase cannot be dismissed.
“The MPC must balance the need to control inflation and protect the rand with the risk of placing too much pressure on an already constrained domestic economy.”
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