Governor of the South African Reserve Bank (SARB) Lesetja Kganyago announced that the interest rates have will drop by 0.25 percentage points in May 2025.
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The Monetary Policy Committee (MPC) decision that will see interest rates dropping by 0.25% could not have come at a better time for the real estate market and aspiring homeowners.
This decision brings the repo rate to 7.25% and the prime lending rate to 10.75%.
Given historically low inflation and continued pressure on household budgets from slow economic growth, Adrian Goslett, regional director and CEO of RE/MAX Southern Africa, notes that any decrease in interest rates would provide substantial relief for consumers.
“Lower borrowing costs translate directly into more affordable monthly repayments, which can help unlock greater activity in the property market,” Goslett said.
He highlighted that while the residential property market has remained surprisingly resilient through a tough economic cycle, he believes that this rate reduction will help reignite buyer confidence, especially among first-time buyers and the middle-income segment.
“It also sends a signal that the Reserve Bank sees scope for supportive policy without compromising its inflation mandate, which should also boost investor confidence and provide room for greater economic growth.”
RE/MAX encouraged both buyers and sellers to act strategically during this more favourable rate window.
“For buyers, it may be a good time to explore opportunities while rates are still trending lower. For sellers, improved affordability could mean a larger pool of potential buyers, which could mean a quicker sale and more competitive offers,” the company said.
While global uncertainties remain, Goslett feels as though this rate cut signals a cautious step toward supporting domestic demand and restoring consumer confidence.
A drop in the rate represents a shift in monetary policy, which will have several effects on the economy, including lower borrowing costs, boosted consumer spending, and increased positive sentiment in the business investment community, said Neil Gopal, CEO at the South African Property Owners Association.
“It also means that those with mortgages will now pay slightly less after a cut. Lower rates mean better affordability, increased buyer confidence, and higher home loan application volumes,” Gopal said.
However, he warned that South Africa should not lose sight of the bigger picture and global economic conditions. “We would need inflation to continue easing and the global economy showing signs of stabilising (tariff wars, etc) for a significant difference to be made.”
Today's decision by the MPC to drop the repo rate by 0.25 basis points from 7.5% will be a welcome reprieve for both property owners and investors, said Chris Tyson, CEO at Tyson Properties.
“Although a series of interest rate cuts were predicted for the first half of 2025, this hit a pause when the central bank left rates steady in March.
"The continued global uncertainty that followed US President Donald Trump’s so-called tariff tsunami, together with local upheavals surrounding the 2025 government budget and elevated unemployment, called for restraint,” Tyson said.
He also pointed out that, although there were indicators that suggested that the Reserve Bank could either drop or even increase interest rates, it had decided to give South Africans some cause for optimism.
“This latest interest rate drop is also likely to counter the depressed economic growth forecast announced in the Finance Minister’s (Enoch Godongwana) third budget last week.”
Within the premium residential real estate markets in the Cape Town Metro, Paarl Winelands, Overberg and Helderberg regions, and Inland Lifestyle Estates, as well as high-end Johannesburg suburbs, inventory levels remain low, with demand particularly from the international market where South African real estate is perceived to offer great value, according to John Herbst, CEO of Fine & Country Sub-Saharan Africa (SSA).
He said that a further reduction in interest rates will bode even more favourably for increased demand from both local and international buyers for premium real estate and will encourage re-investment by local consumers in key markets.
“The further reduction by 25 basis points in the prime lending rate is welcomed and will no doubt lead to much-needed economic activity, leading to renewed optimism and ultimately continued house price inflation growth across all regions, and most notably ease servicing debt for first-time and middle-income households,” Herbst said.