Some economists do not believe there will be significant interest rate cuts this year with some predicting a maximum of a mere 50 basis points (bps) cuts for the entire year of 2025 and others even predicting only one rate cut.
The last cut came in November last year when the South African Reserve Bank (SARB) cut the interest rate by 25 basis points.
The interest rate fell from 8% to 7.75%. This meant that the prime lending rate dropped from 11.5% to 11.25%. The hope is that this week’s interest rate announcement will be a cut of 25bps or 50bps.
Vanessa Murray, the divisional executive for Property Finance at Nedbank CIB said their interest rate perspective for 2025 is that it would not be cut by more than 50 basis points for the entire year. This despite the property sector having benefited from two main events in 2024: the formation of the GNU following the national elections in May 2024, and the drop in inflation, which resulted in the commencement of the interest rate cutting cycle.
“As a result, we are seeing more buoyant activity in the sector overall,” Murray said.
The GNU however is finding itself presently under shaky ground.
However, the property sector has slowly been recovering from a brutal attack during the hard lockdowns of the Covid-19 pandemic in 2020 and the ensuing tough years.
Lightstone Property managing executive for the Real Estate Cluster Hayley Ivins Downes said while 2023 posed challenges, steady improvements in 2024 left them feel optimistic for 2025.
“Interest rates are expected to drop, though not as much as we’d hope, but the momentum from late 2024 suggests a stronger, recovering property market,” Downes said.
FNB Senior Economist Siphamandla Mkhwanazi said the interest rate trajectory will be key to 2025 developments.
“Inflation is forecast to remain below 4.0% through the first half of 2025, averaging 4.5% in 2024, 4.4% in 2025, and 4.5% in 2026 and 2027 respectively,” Mkhwanazi said.
He said this inflation trajectory gives the South African Reserve Bank (SARB) room to lower interest rates.
“We anticipate a 25bps cut at each of the next three Monetary Policy Committee meetings, bringing the repo rate to 7% by mid-2025.
“Of course, there are growing global risks, mainly emanating from policies the new US administration will implement. Should these policies have a significantly inflationary impact in the US, prompting the Fed to halt their cutting cycle, the risk for the domestic property sector is that borrowing costs do not decline as initially expected. That said, for prospective buyers, the intensifying competition among lenders should mitigate this risk,” he added.
Lightstone said the market is increasingly nomadic, with buyers prioritising work-from-home flexibility, security, and lifestyle.
“There’s a clear demand for integrated lifestyle communities with amenities that foster convenience and connection, highlighting a shift toward properties that support a more holistic and adaptable way of living.”
The valuations and market intelligence said risks for the local property sector include economic instability, rising living costs, and municipal challenges in delivering essential services.
The company said these factors strain disposable incomes, making it harder for homeowners to maintain their current property or to upgrade.
It said addressing these risks requires stronger economic policies, improved municipal governance and efficiency, and innovative solutions to increase affordability and accessibility in the property market.
Absa Home Loans Managing Executive Nondumiso Ncapai said many South Africans last year experienced significant financial strain amid high interest rates and other escalating living costs.
“For home loan market players across the industry this meant lower application volumes and a sharper focus on supporting customers during this challenging period with forbearance plans and other relevant solutions.
“However, we expect a gradual recovery moving forward on the back of the interest rate cuts we saw in 2024 and with the possibility of further cuts in 2025, unlocking affordability for new and repeat residential property buyers,” Ncapai said.
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