Comments below by Dr Andrew Golding, chief executive of the Pam Golding Property group
The Monetary Policy Committee’s (MPC) decision to increase the repo rate by 25 basis points reflects the growing inflationary risks facing the South African economy, particularly higher oil prices and the ongoing uncertainty arising from the conflict in the Middle East. The increase takes the repo rate to 7.25% and prime to 10.75%, with the SARB signalling that it remains focused on preventing temporary price pressures from becoming more entrenched.
The decision reflects a more challenging inflation environment than earlier anticipated. While the 25-basis-point increase will add to borrowing costs for households, it needs to be viewed against the broader resilience of the residential property market. The increase is likely to reinforce the need for buyers to be more discerning about affordability and financing costs, but it does not alter the underlying demand for well-located residential property, particularly in markets supported by employment, infrastructure, lifestyle appeal and population growth.
Residential market continues to show resilience
The higher rate will inevitably place some additional pressure on prospective homeowners, particularly first-time buyers who remain more sensitive to monthly repayments. However, banks are continuing to support housing-market activity through competitive lending and products designed to reduce the upfront financial barriers to homeownership.
Zero-deposit and cost-inclusive home loans remain an important part of this picture. According to ooba Home Loans, the proportion of first-time buyer applications for cost-inclusive loans increased more than fivefold, from around 3% in 2021 to nearly 16% in early 2026. Approval rates have also risen significantly, reaching 88.8% for cost-inclusive loans among first-time buyers during this period.
Banks are also continuing to offer loans that can cover some or all of the upfront costs associated with a property purchase for suitably qualified borrowers. Absa, for example, currently offers its MyHome product at up to 110% for qualifying buyers, with the additional 10% available for transfer and bond-registration costs.
This is particularly important in the current environment because affordability is being constrained not only by interest rates but also by the amount of cash buyers need upfront. By helping to finance these costs, lenders are lowering one of the barriers to market entry and supporting continued first-time buyer activity. In the Free State, first-time buyers account for nearly two-thirds of applications, underlining the importance of accessible finance in more affordable markets.
Despite the increase in the repo rate, lending conditions remain competitive. Average weighted pricing is currently around 0.75% below prime, while elevated approval rates indicate continued appetite among banks to lend to appropriately qualified buyers. These factors provide some offset to the impact of higher interest rates, although affordability and credit assessments remain fundamental to loan approval.
The rate increase also reinforces the importance of buyers looking beyond the headline interest rate when assessing a property purchase. Monthly affordability, the quality and location of the property, future infrastructure investment, local economic activity and the longer-term prospects of the area all remain important considerations.
Underlying demand remains evident
Looking ahead, residential property demand continues to be supported by demographic, lifestyle and economic factors, although the market is not moving uniformly. Individual regions and nodes are being shaped by their own economic conditions, migration patterns, infrastructure, supply and buyer profiles.
There is particular resilience in markets where residential demand is supported by economic activity, sound municipal management, established infrastructure and strong lifestyle appeal. These fundamentals are increasingly important as buyers become more selective and assess properties not simply on price, but on the overall proposition they offer.
There are also encouraging signs that properties are moving through the market at a faster pace. FNB’s latest Property Barometer reports that the average time on the market has declined to 10 weeks and one day in Q3 2026 – the fastest selling pace recorded since 2022.
The latest rate increase therefore comes at a time when the residential market is already demonstrating its ability to adapt to changing economic conditions. While higher borrowing costs will require buyers to reassess affordability and may temper activity, continued first-time buyer demand, competitive lending conditions, improving selling times and a consistent demand at the top end, point to a market that remains resilient.
For buyers and investors, the emphasis is likely to remain on careful financial planning and selecting properties in locations with sound fundamentals. In an environment of higher interest rates and economic uncertainty, quality, location, infrastructure and long-term demand are becoming increasingly important in determining the prospects of individual residential markets.
All comments above by Dr Andrew Golding, chief executive of the Pam Golding Property group
For further information visit www.pamgolding.co.za
