Property leaders warn: Interest rate hike could crush South Africa's fragile economy

Source: Supplied. Samuel Seeff, chairman of the Seeff Property Group.

Industry leaders argue that recent oil-price volatility, driven by conflict in the Middle East, is likely temporary and should not dictate monetary policy, with stable inflation and subdued growth supporting a more cautious approach to interest-rate adjustments at this stage.

The underlying fundamentals for keeping the rate unchanged remain strong. The Rand has remained fairly stable below R17 to the USD. Inflation is contained within the Bank’s new target range, and in fact dipped to 3.0% for February (from 3.5% in January and 3.6% in December), clearly suggesting there is no fundamental reason for a rate hike and increase in the cost of debt at this stage.

In fact, Seeff believes the Bank actually missed a golden opportunity to cut rates in January considering the favourable inflation figures and strong Rand. Rather than providing a vital boost to the economy and property market, we now have a situation where the interest rate may be at risk due to a temporary glitch in oil prices.

Economic momentum lags

In general, Seeff says the Bank has erred on the side of caution by not bringing the rate down faster. Consequently, the lower rate has made no notable impact on economic growth or property sales. The GDP growth rate for the last quarter of 2025 was a disappointing 0.4%, and the year ended on just 1.1%, below the Bank’s own projection of 1.3%.

This lack of momentum is mirrored in the property market, where performance remains notably below expectations. He points out that the reported big increases in property prices, especially in the Cape, have masked the reality of weak performances in most areas, with sales volumes overall still trading down by about 19% compared to 2021/22.

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Mortgage-application data from ooba Home Loans also mirrors this trend. While the value of applications has improved marginally since the latter part of last year, the actual number of applications remains well below previous highs (2021/22 volumes).

Seeff notes that while confidence is beginning to return with an improved economic outlook, neither the economy nor the property market has felt a real uptick from the interest-rate cuts as they were simply too slow and too low.

Economic stability is now vital, and the market should not be unsettled by a rate hike which adds to the existing pressures on consumers and the economy. South Africans are already facing significant hikes in electricity and fuel costs.

The Bank should not add higher debt-servicing costs to these burdens, especially since consumers have not been overspending. To ensure long-term stability and job growth, the Reserve Bank must hold the rate steady and keep the outlook for future cuts positive.