Reserve Bank interest rate hike gives Joburg homeowners a leg-up over Cape Town

The Reserve Bank’s decision to hike South Africa’s interest rates will put pressure on households across the country, particularly homeowners and the local property market.

However, since Johannesburg still offers relative value compared to Cape Town and many coastal areas, its property market is likely to remain active despite higher interest rates.

This is according to Landsdowne Properties CEO and founder Jonathan Kohler, who explained that the rate hike will be felt directly across the residential property market.

Kohler’s comments come after the Reserve Bank’s Monetary Policy Committee voted to hike South Africa’s interest rates by 25 basis points at its meeting on 28 May.

This decision will bring the Reserve Bank’s policy rate to 7% and the prime lending rate to 10.50%.

“For homeowners with bonded properties, the impact is immediate through higher monthly repayments,” said Kohler. 

“For buyers, affordability becomes tighter. For sellers, buyer decision-making becomes more cautious and more price sensitive.”

He explained that the Reserve Bank’s decision comes at a time when households are already managing higher living costs, as prices for food, fuel, transport, utilities, insurance, and levies are rising.

When it comes to the property market, Kohler said buyers now face reduced purchasing power, and some will qualify for smaller bonds.

“Others will need larger deposits or will need to adjust their search to more affordable areas, smaller homes or properties with lower monthly running costs,” he said.

“A rate hike makes prequalification essential. Buyers should know what they can afford before entering negotiations.” 

“They should also leave enough room in the budget for further increases in utilities, levies and household costs.”

When considering a property purchase, Kohler urged prospective buyers to consider the full monthly cost of home ownership, and not just the purchase price.

Buyers should be aware of costs such as bond repayments, rates, levies, utilities, insurance, maintenance, security, and transport.

Opportunity for Joburg

While the country’s property market as a whole will feel the impact of a rate hike, Kohler said some areas may feel it differently.

In particular, he said Johannesburg is likely to remain active because it still offers relative value compared to Cape Town and many coastal markets. 

“This value advantage matters in a higher rate environment because buyers become more focused on affordability,” he said.

Kohler said well-managed estates, secure apartment blocks, and suburbs with reliable access to schools, business nodes, and transport routes should remain more resilient. 

He explained that buyers will increasingly favour properties where monthly costs are transparent and where management structures are strong.

“For Johannesburg sellers, realistic pricing becomes critical. Buyers may still be willing to transact, especially where value is clear, although they will be more disciplined in what they offer,” he said.

In contrast, the rate hike will place more pressure on affordability in areas like Cape Town, where prospective buyers already contend with limited supply and increased semigration.

Kohler said the rate hike will especially impact first-time buyers and middle-income households in Cape Town.

“Buyers may need to consider smaller properties, sectional title homes, emerging suburbs, or a longer timeline to purchase,” he said.

“For sellers in Cape Town, demand should remain strongest where homes are realistically priced, well located, and supported by scarce supply.”

However, while Joburg may have a leg-up on Cape Town when it comes to purchase price affordability, Kohler said the overall cost of homeownership could differ wildly between the two metros.

He explained that the pressure point in Johannesburg is the total household cost, as residents face rising municipal tariffs for water, sanitation, and electricity.

At the same time, service reliability and infrastructure concerns in Johannesburg will also influence buyer confidence in some areas.

Conversely, Cape Town’s residential market remains structurally strong, supported by limited supply in many areas, semigration demand, lifestyle appeal, and confidence in municipal service delivery.

In addition, he said Cape Town’s rental market is likely to remain competitive amid higher interest rates, particularly in high-demand areas. 

However, he warned that tenants trying to save for a deposit may find it more difficult where rent, transport, and daily living costs absorb a larger share of income.