The latest Consumer Price Index (CPI) figures released by Statistics South Africa show a positive turn for South Africa’s economy. 

Inflation slowed to 4,6% in July, down from the anticipated 4,9%. This unexpected decline brings renewed hope for a more stable economic environment and for the housing market, where inflationary pressures have been a significant concern. 

Antonie Goosen, principal and founder of Meridian Realty, reflects on this development with cautious optimism. “The decline in the CPI is a welcome sign that inflationary pressures may be easing, which is positive news for consumers and the housing market alike,” he notes.  

Interest rates 

The decrease in inflation figures heightens the possibility of a more accommodative stance from the South African Reserve Bank (SARB) in the upcoming Monetary Policy Committee (MPC) meeting in September.  

“While the drop in the CPI improves the likelihood of an interest rate cut, it’s important to remember that the SARB will consider a range of factors before making its decision. A rate cut would certainly provide relief to homeowners and potential buyers, particularly in terms of mortgage repayments and loan accessibility,” Goosen explains. 

Lower interest rates could stimulate the demand in the housing market, particularly for first-time buyers who have been squeezed by high borrowing costs in recent years. However, Goosen also warns of potential pitfalls. “If the rate cut is too aggressive too soon, it could put pressure on the exchange rate, which could negatively impact inflation. Balance is key.” 

Implications for the housing market 

A reduction in interest rates would lower monthly mortgage payments, making homeownership more attainable for a broader segment of the population, as well as providing much-needed financial relief to existing homeowners servicing their bond. 

Goosen highlights the importance of this for middle- and lower-income buyers, who have been disproportionately affected by rising interest rates and inflation. 

Regions where urbanisation is driving up the demand and prices, could see a renewed interest from buyers if the borrowing costs decrease. However, Goosen cautions that the broader economic context must be considered.  

As the housing market anticipates the September MPC meeting, Goosen stresses: “The potential for a rate cut is an encouraging sign for the housing market, but it’s essential that this is part of a broader strategy to ensure economic stability.” 

An unexpected decline in the CPI and the possibility of a rate cut could have a positive impact on the housing market, but a balanced approach is still required. 

Full acknowledgement and thanks go to https://www.meridianrealty.co.za/ for the information in this article.