South Africa

What does January’s interest rate decision mean for 2024’s housing market?

Read time:
A person pointing at a graph

The South African Reserve Bank has once again held interest rates steady, keeping the repo rate at 8.25%.

The decision to hold interest rates in January was widely expected, but the Monetary Policy Committee’s (MPC) statement backed it up by setting out their economic outlook for the rest of the year.

While inflation fell to 5.1% in December, the MPC said the outlook for 2024 is uncertain. In all likelihood, consumer price growth won’t move far from its current level and is expected to average 5% in 2024 – but there is still a risk that it could be higher.

As such, the MPC believes sticking with the current rate is “consistent with the inflation outlook and the need to address rising inflation expectations”. Any cuts will have to wait until inflation is more sustainably within the 3-6% target range.

Market effects to continue in 2024

Meanwhile, persistently high interest rates continue to mould the SA residential real estate market.

First-time homebuyers are putting down larger and larger deposits to beat the high cost of a bond. According to mortgage lender ooba Home Loans, the average deposit in Q4 2023 was 10.9% of the total cost of the property (up from 8.8% in Q4 2022), and stood at R120 000.

Prospective buyers have been delaying their purchases to build up larger deposits: the average first-time buyer was 36 years old, up from 35 in 2022. And those who haven’t been able to save are conceding defeat for now. ooba reports that first-time buyer mortgage applications have fallen to 48% from their peak of 56% in 2020.

In the meantime, they’re renting – adding to the rising demand for rental properties. This has heated up the rental market even as home sales slow down: data from the PayProp Rental Index shows that rental growth is back at levels not seen since 2017.

No items found.

See PayProp in action

Let us show you how to get more out of work and more out of life!

  • Real-time property management
  • Real-time bank integration
  • Real-time reconciliation & payments