South African consumer confidence in the property market registering at its highest in a decade and many people are looking to buy property.
Image: Dhyamis Kleber/Pexels
The benefits of an interest rate cut this month would outweigh the potential risks that the South African Reserve Bank is guarding against.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, said reducing the repo rate could boost consumer confidence, increase affordability, and encourage greater economic growth.
“Lower interest rates translate into reduced monthly repayments on home loans and other debts, putting more money back into consumers' pockets and stimulating broader economic activity. This additional disposable income will positively impact other sectors reliant on consumer spending, driving economic growth across the board,” Goslett said.
Despite inflation being the lowest it has been since June 2020, economists widely anticipate that the SARB will keep the repo rate unchanged again this month.
Thus far, the ongoing global trade tensions and domestic economic challenges have led the SARB to adopt a cautious approach, favouring rate stability to navigate potential risks.
Moreover, RE/MAX of Southern Africa said an interest rate cut will send a strong positive signal to international and local investors, reinforcing confidence in South Africa’s economic recovery trajectory, especially following the instability around VAT.
The real estate company said that while the possibility of a rate cut is more likely later in the year, the SARB is at least expected to maintain the current rate in the near term.
“If nothing else, consistent interest rates do contribute to a predictable market environment, benefiting all stakeholders involved in property transactions,” it said.
Goslett advised buyers to use the stable interest rate period to evaluate their financial capacity and explore finance options-but try to get into the market before interest rates drop, as lower rates typically attract more buyers, leading to increased competition and potentially higher property prices.
“For homeowners and real estate agents, staying informed and proactive will be key to navigating the evolving economic landscape,” Goslett said.
Johanna Kyrklund, group CIO at Schroders, said government and central bank responses will also influence market moves.
She said besides the trade negotiations, markets will also be driven by fiscal and monetary responses to weaker growth, adding that the US President Donald Trump’s administration remains committed to tax cuts, and the release of the debt brake in Germany is helpful.
"Similarly, the Chinese leadership is considering measures to stimulate the consumer market. Monetary policies might be more divergent. Tariffs are generally deflationary for Europe, so we expect rate cuts to be accelerated there.
"The situation is more complex in the US due to the short-term inflationary impacts of higher import prices, so we expect the Federal Reserve will be slower.
"Ultimately, we do expect policy to turn more reflationary in response to the tariffs, which should help to mitigate some of the impact,” Kyrklund said.
The global investment management company said in the medium term, caution was needed, however. It said the ultimate constraint on looser policies will be the consequences for inflation and debt levels, and the willingness of bondholders to accept this.
“If debt levels are seen to be unsustainable, or if the commitment of policymakers to some form of fiscal responsibility and inflation control is questioned, we could see yields on bonds rise.
There has been some volatility in US government bonds. But for now, we judge this risk to be low. Central bank independence is still intact and concerns about growth are capping yields on bonds, but we are watching the pricing of inflation and bond/equity correlations closely.”
In the April global commentary, Peter Little, fund manager at Anchor Capital, said interest rate markets experienced significant volatility last.
He said the initial response to the Liberation Day announcements saw the US government’s 10-year borrowing rate drop below 4% p.a. as investors priced in a higher probability of a US recession, increasing the likelihood of the US Federal Reserve (Fed) needing to cut interest rates to support economic activity.
“However, the borrowing rate soon climbed back towards 4.5% p.a., with market commentators speculating that foreign holders of US government bonds were selling these securities in response to US tariffs.
"The volatility was further exacerbated by Trump’s comments about seeking ways to circumvent restrictions on political intervention in the operations of the Fed to remove Chairman Jerome Powell.
"Ultimately, Trump walked back those threats, and the 10-year borrowing rate ended the month roughly where it started, at 4.2% p.a,” Little said.