Last week, the repo rate was cut by 25 basis points for a third time, bringing the prime rate to 11%. In our quarterly update on the repo rate, industry leaders explore what this cut means for buyers and sellers and what to expect for the rest of 2025.

Regional director and CEO of RE/MAX of Southern Africa, Adrian Goslett, welcomes the decision to lower the repo rate by 0.25%, “Following previous rate cuts in September and November, this additional adjustment positions the property market for potentially more favourable conditions in the months ahead, keeping in mind that the impact of an interest rate reduction typically becomes evident a few months after the market has had time to adapt to the change”.

In December 2024, following two interest rate cuts, ooba Home Loan’s statistics showed an increase in the average purchase price paid for property in the month to R1.67 million – a healthy 6.5% year-on-year increase.

“The average purchase paid by first-time homebuyers also rose to R1.26 million over the same period, marking a 6.7% increase,” says ooba CEO Rhys Dyer.

Motivated by attractive interest rates, coupled with favourable bank lending conditions, Dyer says that national demand for buy-to-let properties surged to a record 15.1% in December 2024, reaching a new record level, up from a previous high of 14.8% in December 2023.

“Last month’s buy-to-let figures were almost entirely attributable to a 10.8 percentage point increase in demand in the Western Cape, with 38.8% of all applications attributed to buy-to-let properties.”

First-time home buyers benefited from the highest loan-to-value (LTV) ratios seen in recent years, at 90.4% in Q4’24, compared to 88.4% a year ago.

“Our data shows that the banks continue to support homebuyers with 100% loans, despite the climate,” says Dyer.

Here’s the real reason buyers should be buying now

Stephen Whitcombe, MD of the Firzt Realty group, notes that housing demand and prices have already started to rise in response to the two interest cuts announced last year and that this trend will no doubt be further fuelled by the cut.

“Those planning to become homeowners for a while should find it easier now to qualify for a home loan, especially if they have received a salary increase in the past year. For example, those seeking a R1m bond will now only need a household income of around R34 500 a month, compared to around R36 000 a month a year ago.”

But this window of opportunity will be limited, he says. “Rising demand always means less inventory – and more competition for properties for sale. And that translates into higher prices, so if prospective buyers wait too long now to get into the market, they will lose the advantage created by the recent rate cuts”.

Advice for distressed homeowners

Berry Everitt, CEO of the Chas Everitt International group, notes that according to the latest FNB Property Barometer, 23% of all current home sales in SA are being made due to financial pressure, which indicates that a large number of households are still feeling the effects of the rapid post-Covid rise in both inflation and interest rates. Indeed, the latest available figures from the Prudential Authority, which regulates SA’s banking sector, estimate that 6% of homeowners are already in arrears with their home loan repayments.

As a result, Everitt says, homeowners who have been feeling the pinch should look well beyond any short-term relief brought by this week’s cut and try to work out whether they will be able to cope when or if the cost of living starts to rise again when the local authorities introduce their annual utility cost increases—usually around July—or if the Finance Minister decides to raise VAT or income taxes in the Budget.

“And if they foresee that they will probably find themselves back in a tight spot, the time to do something about it is now…the demand for residential property is definitely on the rise again across SA, and values are sure to follow. “Another reason is that if you wait until you are in real financial distress and start defaulting on your bond repayments, you will put yourself in a precarious position. Not only will you be at risk of having your home repossessed and sold off by the Sheriff, but you will also be at risk of damaging your credit record so badly that you will have difficulty renting somewhere new to live and may not be able to buy another home for many years.”

What can we expect for the rest of 2025?

Dr Andrew Golding, chief executive of the Pam Golding Property group, believes that “Although this month’s (January 2025) rate cut was widely anticipated, the outlook for interest rates for the remainder of the year is far less clear with opinions ranging from no further interest rate relief to one single cut of 25bps. However, the timing of any further rate cut is also debated with some commentators suggesting March 2025 and others later in the year”.

This would make the current interest rate-cutting cycle unusually shallow. This is largely a reflection of the heightened uncertainty in the global economy amidst concerns of a resurgence in inflationary pressures, which is making many central banks—and the SA Reserve Bank in particular—cautious.

The stream of executive orders from the US White House is also creating uncertainty, prompting a reassessment of the likely scope for further interest rate cuts in the United States, which has shifted from initial expectations of three 25bps rate cuts to a single cut later this year. Fewer US interest rate cuts leave less space for local interest rate relief, and any further rate cuts will depend on global and local developments.

Samuel Seeff, chairman of the Seeff Property Group, believes the recent cut is simply not enough. A 50bps cut would have been far more meaningful, and he says there was adequate support for the Reserve Bank to counter the economic stagnation and unemployment risks with a more robust cut. The country can no longer afford what is effectively the highest real interest rate in the world (differential between the interest rate and inflation) while the economy is limping along, barely growing, and unemployment is spiking.

Jan le Roux, CEO of Leapfrog Property Group, shares “Whereas we are grateful to have a Reserve Bank with a conservative and safe approach it is also true that one can  sometimes err on the side of caution. It would be helpful if the committee could consider  bigger increments when lowering the rate going forward – the entire economy is in need of a boost, the property market especially so”