Property market gets a booster to carry it into 2026
The residential property market has just received a year-end shot in the arm from The Reserve Bank Monetary Policy Committee (MPC), which decided this week to reduce interest rates by 25 basis points, bringing the repo rate to 6,75% and the prime rate to 10,25%.
“This will lower the repayments on all sorts of debts, from credit cards and personal loans to car finance and mortgage bonds,” says Stephen Whitcombe, MD of the FIRZT Realty group, “and will also make it easier for homebuyers to qualify for new home loans.
“Just as importantly, it will boost consumer confidence in the future of the economy, especially as it comes hot on the heels of SA being taken off the ‘grey list” and being given an improved sovereign debt rating by S&P. Consequently, we expect to see steady increase in sales activity over the next few months.”
Looking further ahead, he says, that although there is a lot of new stock coming on to the market in Cape Town, it is anticipated that Johannesburg and Pretoria will still be much more affordable cities in terms of real estate, and offer more opportunities for first-time buyers and buy-to-let investors.
“Price appreciation will vary from area to area but is likely to continue much as it has in the past 12 months, unless there is a sudden downward shift in interest rates, which we consider unlikely in the light of the fact that the Reserve Bank and Treasury have agreed on a new inflation target of 3%.
“As it is, the falling interest rates over the past year have brought many new buyers into the market, as they did in 2020/ 21. Lower interest rates also tend to drive higher rental increases, and once rentals start to equal bond repayments for the same type of property, many tenants are encouraged to become homeowners.
“However, it must be said that to really boost the market, SA needs to see significantly faster economic growth and job creation. Lower rates don’t help if you are unemployed. Obviously the recent drop in the unemployment rate is a step in the right direction, but we are really hoping that the large infrastructure and green energy projects now in the pipeline will come to fruition and keep the momentum going.”
Turning to buyer trends, Whitcombe says the first-time buyer sector is likely to be the busiest in 2026. “Figures show that they already account for almost 50% of all bond applications now and we think this will be closer to 60% next year. However, there are also more buyers now in the luxury sector, and especially in gated estates, while the middle-income/ medium-price market is shrinking.
“Indeed, we are seeing a strong trend towards downsizing in the middle-income market to limit the effects of rapidly rising running costs. Local authority water and electricity price increases have been above inflation for several years, and the costs of food, fuel, insurance, security and maintenance, as well as municipal rates keep rising, albeit more slowly now, so an increasing number of suburban homeowners are finding themselves ‘house rich and cash poor’.
“We think this will continue to drive strong demand for more modern, compact and lower maintenance properties in complexes and estates where many costs are shared and systems are in place to reduce water and electricity bills. It will also drive more densification as owners subdivide large suburban stands to cut costs, or sell their larger properties to developers planning to build apartments, townhouses and clusters.
“We also foresee that the rental sector will thrive and become increasingly attractive to investors, because there are a huge number of households that may well have more disposable income now due to the cuts in interest rates, but are still looking to rent for various reasons. The latest Absa Homeowner Sentiment Index shows, for example, that at least 25% of current tenants are not considering buying at present. Some are still paying down big debts from the high interest, high inflation years, while others are seeking the flexibility to move in pursuit of good employment opportunities or to be close to family.”
Issued by FIRZT Realty
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Stephen Whitcombe on
082 412 2949
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About FIRZT Realty
Established in 2003, FIRZT Realty initially focused on residential real estate, but has since expanded to offer a broad range of services in both the residential and commercial property sectors, including sales, rentals, auctions and property management.