Cape Town's property market under strain from rising costs and impending rate hikes
Cape Town’s property market faces mounting pressure as rising costs and rate hike fears weigh on buyers and growth.
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Cape Town’s property market may be outperforming much of the country, but industry leaders warn the apparent boom is masking growing strain, with a potential interest rate hike threatening to deepen pressure on buyers and the broader economy.
The property sector has cautioned against a premature interest rate hike, arguing that stable inflation, weak economic growth and short-term global pressures do not justify tightening monetary policy when the South African Reserve Bank meets this week.
Samuel Seeff, chairman of the Seeff Property Group, said rising oil prices and the prospect of higher fuel costs should be treated as temporary shocks linked to Middle East tensions, rather than triggers for a rate increase.
“The fundamentals for keeping the rate unchanged remain strong,” he said.
The rand has remained relatively stable at around R17 to the US dollar, while inflation continues to trend downward, slowing to 3.0% in February, according to official data, from 3.5% in January and 3.6% in December, within the Reserve Bank’s target range.
Seeff said these conditions pointed to an earlier opportunity for rate relief that was missed.
“In fact, the Bank missed a golden opportunity to cut rates in January given the favourable inflation figures and stronger rand,” he said.
Instead, he warned policy risks being driven by short-term oil price volatility rather than longer-term domestic fundamentals, even as market expectations continue to favour a cautious hold or gradual cuts.
The broader economic picture remains subdued. South Africa’s GDP grew by about 0.4% in the final quarter of 2025, bringing annual growth to around 1.1%, below earlier projections.
This sluggish momentum is reflected in the property market, where activity remains below pre-2022 levels. Seeff said headline price growth in Cape Town has masked weaker underlying performance, with affordability pressures intensifying even as demand linked to semigration keeps prices elevated. Sales volumes remain about 19% lower than the 2021/22 period.
Mortgage data also points to constrained demand. While the total value of home loan applications has improved marginally, the number of applications remains well below previous highs.
Although confidence is gradually returning, Seeff said the impact of previous rate decisions has been limited, with cuts too slow and too small to materially shift growth or housing activity.
He warned that raising rates now would add pressure to already strained households, many of whom are grappling with rising electricity and fuel costs expected to increase further in the coming months.
“Economic stability is now vital. The market should not be unsettled by a rate hike which adds to the existing pressures on consumers and the economy,” Seeff said.
He added that consumers have not been engaging in excessive borrowing, and that increasing debt servicing costs at this stage could undermine recovery efforts.
The property sector is calling on the Reserve Bank to keep rates unchanged and maintain a supportive outlook, with policy certainty seen as key to restoring growth, sustaining housing demand and supporting job creation.