To combat inflation, the South African Reserve Bank(SARB) might raise interest rates, increasing borrowing costs and potentially reducing demand in the property market.
Image: Leon Lestrade.
While the recent announcement by the US to implement a 90-day pause on most tariffs has been met with optimism in various sectors, there will be ripple effects on the South African property market.
The 90-day tariff pause provides temporary relief, but the overall effects of global trade policies on South Africa's property market are still complicated, says RE/MAX of Southern Africa's Regional Director and CEO Adrian Goslett.
“Global trade policies significantly influence South Africa's economy. Tariffs and trade tensions can affect the cost of goods, employment rates, and overall economic growth.
"When major economies like the US engage in trade wars, the resulting economic uncertainty can lead to decreased investor confidence and potential capital outflows from emerging markets, including South Africa, leading to a depreciating rand, increased inflation, and higher interest rates - all of which can dampen the property market,” Goslett said.
Elaborating on this phenomenon, he explains that a weaker rand makes imported goods more expensive, contributing to inflationary pressures.
To combat inflation, he said the South African Reserve Bank(SARB) might raise interest rates, increasing borrowing costs and potentially reducing demand in the property market.
“We have only recently begun to enjoy the respite of lower interest rates-let’s hope conditions don’t force the Reserve Bank to swing back into a hiking cycle.”
Thankfully, the decision to implement a 90-day pause on tariffs for most countries has been perceived as a step toward stabilising global trade relations.
Goslett says that this pause could ease some of the economic uncertainties that have plagued international markets and should hopefully hold off the need for any interest rate adjustments.
He said that for South Africa, a reduction in global trade tensions will hopefully bolster investor confidence, potentially leading to a more stable rand and improved economic conditions conducive to property market growth.
However, RE/MAX said the exclusion of China from this reprieve means that significant global trade tensions remain unresolved. It added that given China's pivotal role in the global economy and its status as a major trading partner for South Africa, ongoing US-China trade disputes could have indirect adverse effects on South Africa's economic landscape.
The USDZAR opened the new trading week at 19.0550, according to Nedbank CIB research analyst Reezwana Sumad on Tuesday morning.
“The opening levels proved to be the highs of the day, as the much-improved levels in the local unit spurred USD sellers into action, and this saw it trade very close to the 18,8000 level.
"At the time of the close, it was trading at 18,8650. This morning, the USDZAR is currently trading at 18,8550. The EURUSD is little changed from the previous open at 1,1355 this morning. The GBPUSD posted steady gains over the course of the previous session, and it is currently trading at 1,3215 this morning. The possible trading range for the USDZAR today is 18,6000 to 19,1000.
"The local unit traded at sub 19,0000, and market trading conditions have calmed over the preceding session, although participants remain alert to any new headlines emanating from the US regarding tariffs,” Sumad said.
The company’s CEO said that despite the uncertainties triggered by global trade tensions, property investment in South Africa remains a resilient asset class, offering long-term appreciation and returns.
“Strategic investors who keep this in mind can navigate short-term volatility and capitalise on opportunities arising from market adjustments. Property remains a solid foundation within diversified investment portfolios.
"Those who want to capitalise on the opportunities that emerge during these uncertain times should speak to a reliable real estate professional for some free advice and insights,” Goslett said.
Earlier this month, Mfundo Mabaso, the product head at FNB Home Structured Lending, told this publication that in 2024, the average age of homebuyers within the FNB client base increased compared to 2021, though not as dramatically as the example suggests (from 37 in 2021 to 39 in 2024 for primary applicants). #
He said one of the key factors behind this shift is the high inflation rate over the past four years, as it remained consistently above 5% from September 2021 to July 2024, peaking at 7.8% in July 2022.
“This had a negative effect on real wage growth and, although house price growth was relatively muted during this time in South Africa, it still made property purchases more expensive.
"Additionally, the recent interest rate cycle has been the highest since the global financial crisis that started in 2008. It's also worth noting that there was a noticeable increase in younger buyers post-Covid when both inflation and interest rates were at record lows, making property more affordable.
"All of these factors likely contributed to the shift in the age profile of clients,” Mabaso said.
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