South African consumers are holding on to their money, being cautious about property purchases and not taking on more lending, according to economists.
A possible rate cut this week on Thursday could give consumers impetus to start spending but it still wouldn’t be enough to see a drastic uptick in home buying, says Standard Bank’s head of Home Services Toni Anderson.
This is despite the property market kicking off 2025 with some positive sentiment with regards to sales activity and marginal house price growth.
Responding to an Independent Media Property enquiry, Standard Bank’s head of Home Services Toni Anderson said the market appears to be awaiting further lending rate reductions that were forecast as the end of 2024.
However international trends of negative CPI may indicate a lag in these forecast cuts.
“Consumer affordability pressure will remain a challenge for both new business demand as well as customers meeting repayments on existing home loans.
“Increasing costs of living and household expenditure could consume any additional funds available from the two previous rate cuts last year,” Anderson said.
The National Debt Counsellors’ Association (NDCA) chairperson Benay Sager said as the country began 2025, he thought that primarily money owed to the banks, in terms of mortgages, made up the bulk of consumer debt overall.
He said the rest will be money owed to vehicle financiers, as well as unsecured debt.
“From a residential property perspective, homeowners would be most impacted by changes in the interest rates. Often bonds and mortgages have a 20-year life cycle and they are very susceptible to any changes in interest rates, so I think the biggest thing to watch is where the interest rate will go,” Sager said.
“I think we’re all hoping the interest rate will go down multiple times this year, which would be great if you’re a bond owner as it will provide relief. But I think it’s a bit of a waiting game to see what happens beyond March or so,” he added.
There are mixed feelings from economists about whether there will be an interest rate cut this week and if so, how big however most are predicting a 25 basis points (bps).
In November, 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%.
According to the Standard Bank’s unit, there is more positive sentiment at the beginning of 2025 and anticipation to see some property sector growth in the year in comparison to 2023 and 2024 where they knew that the market would experience contraction and less demand from buyers.
It added that the property market is highly dependent on lending rates and the 50 bps drop at the end of 2024 has sparked some quarter-on-quarter improvement. However, this unit said the country will need to see further reductions to see more impactful growth.
Investec chief economist, Annabel Bishop said the Government of National Unity (GNU) had inspired a lift in business confidence, adding to the momentum for growth in property.
“The commercial and residential property sectors are expected to both see accelerating growth in South Africa leading out to 2030. This outlook is based on an expected improvement in GDP growth, further interest rate cuts, and moderate inflation,” Bishop said.
On the other hand, the University of Pretoria’s Professor in Real Estate, Douw Boshoff, said that although there were more positive views on the economic situation in the country, including growth forecasts and interest rate reductions, the international uncertainty is dampening the optimism.
He added that the property market is in need of very solid economic growth in order to overcome the recent downturns, which is currently not sufficient to create a significant positive impact on the market.
“Although the property market is expected to continue some improvement, it is coming from a low base after Covid, and is struggling to fully recover due to poor fundamentals.
“The recovery is not enough to create a stimulus for down the line sectors like construction, which generally provides a lot of jobs in the unskilled and semi-skilled labour pool. So although some growth is expected, it is considered to be modest if significant corrective action is not taken by the local government at least,” Boshoff said.
Standard Bank’s Home Services said there is a lot of stock available in the market and they currently still see this as a buyers’ market in most provinces.
Western Cape on the other hand remains an anomaly with high levels of demand and higher levels of property price growth, they said.
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