Lower interest rates boost real estate market

ALTHOUGH geopolitical events beyond our borders could derail our economy in ways we cannot fathom, there is room to be optimistic about South Africa’s residential property market.

- MARTIN HESSE

The national market has been in the doldrums (there have been regional exceptions, such as the Western Cape) ever since the post-COVID inflation surge forced the SA Reserve Bank to start raising interest rates at the end of 2021.

These continued to climb in 2022 and ‘23 until they were the highest they had been since mid-2009.

‘There were other factors, of course: this time last year many South Afri-cans, including me, were very gloomy, having endured many months of unprecedented load-shedding and witnessing the rapid disintegration of our road, rail and harbor infrastructure.

There was also the remarkable rise of the MK Party, which eroded the ANC’s support base and which many saw as a threat to economic stability.

However, we then had our elections and the formation of the Government of National Unity (GNU), the cessation of load-shedding and a decline in inflation, with the consequent easing of interest rates, and suddenly the future looked brighter.

There is always a lag effect on business activity, but by the end of last year the effects of these positive developments were beginning to materialize.

With the repo rate dropping a full percentage point, from 8.5% to 7.5% between July 2024 and February this year, and hopes of more rate drops to come, residential property appears to have turned a corner.

I spoke earlier this week to a Sand-ton estate agent, who said 2024 had been the worst year she had ever experienced in the property game, but this year had got off to a good start.

She also noted something of a reversal of the “semigration” trend of people moving out of Johannesburg and settling in coastal cities such as Cape Town.