How Trump's policies could shape the South African property market

The South African property market is one of the sectors that could see direct and indirect influence from the policies and global economic shifts triggered by the new United States President Donald Trump.

This is according to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who said that global politics always has an impact on local markets.

"While the South African property market is predominantly influenced by domestic factors such as interest rates, inflation, and local investor confidence, the broader international landscape—particularly US policies can’t be ignored," Goslett said.

A key factor to consider is the strength of SA's currency the rand against the US dollar.

During Trump's presidency, economic policies aimed at "America First" often led to market volatility and fluctuations in the strength of emerging market currencies, including the rand.

According to Goslett, a weakened rand increases import costs and could push up inflation, putting more pressure on the South African Reserve Bank (Sarb) to adjust interest rates.

Higher interest rates typically lower affordability for homebuyers and discourage the overall demand for property.

Goslett notes there are potential upsides as uncertainty on the global stage often drives high-net-worth individuals to seek property investments in stable markets.

"South Africa’s real estate sector offers attractive opportunities for foreign investors seeking value for money. This might mitigate some of the negative consequences of broader global economic challenges," Goslett explained.

Ultimately, the SA property market is shaped by a complex number of factors, and while Trump's policies may not have an immediate or dramatic impact, they might have an indirect role in how the property market performs in the medium to long term.

Goslett said: "Regardless of external influences, South African property remains an excellent long-term investment. Buyers and sellers alike should focus on their personal needs and financial situations, working with trusted real estate professionals to navigate any potential changes in local real estate market conditions."

Interest rate cut

This uncertainty comes just after South Africans experienced some reprieve after the interest rate cut in January. 

On January 30, the Sarb's Monetary Policy Committee (MPC) announced that the interest rate was cut 25 basis points, lowering the repo rate to 7.50% and the prime lending rate to 11.0%.

This was the third time the interest rate was cut in less than six months.

Rhys Dyer, CEO of ooba Group stated that the South African Reserve Bank's reduction of the interest rate, coupled with the possibility of more interest rate cuts, will boost the momentum in South Africa’s residential property sector, indicating robust growth in home loan demand.

He added that with economic activity still at subdued levels and headline inflation at just 3.0% in December last year, there is a strong case for further interest rate relief locally. However, the global economic outlook may dictate some changes in the months to come.

"The global economic and inflation outlook is rather uncertain, and the Sarb may be reluctant to cut interest rates too hastily and run the risk of any reversal in the progress achieved thus far in containing price pressures," Dyer said. 

Riaan Grobler, head of advisory services at Everest Wealth believes that the rate-cutting cycle is only expected to continue until at least mid-2025.

According to Grobler, the interest rate is also expected to decrease further in March and May. This will result in a total decline of at least 100 basis points, or perhaps even 125 basis points.

There is always the possibility that the interest rate-cutting cycle will slow down or end quickly.

The United States Federal Reserve’s (Fed) next interest rate decision is on January 29 and is anticipated to halt rate cuts, with the possibility of further cuts in March or May, according to Grobler.

Grobler said: "In December, the Fed delivered a 25-basis-point rate cut – the third consecutive interest rate cut for 2024. It was already clear then that the Fed would start to become more cautious afterwards and eventually announce fewer and lower cuts than previously expected."

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