Despite an interest rate hike, South Africa's property market remains a sound investment. Higher borrowing costs have priced some first-time buyers out of homeownership, which is pushing more people into the rental market, driving up rental demand, reducing vacancy risk, and giving buy-to-let investors stronger negotiating power on rent. Current rates also remain below South Africa's long-term historical average, and bank approval rates remain favourable for qualifying buyers.
Are you on the lookout for your next investment opportunity? With ongoing concern about the interest rate hike in South Africa, it's a fair question to ask whether property is still a good place to put your money. Here are five reasons why investing now, rather than waiting, can still be a smart move.
Property24, South Africa's leading property sales portal, reported that rising borrowing costs have dampened the market, causing affordability challenges for first-time homebuyers, especially those with lower incomes. This is one of the clearest effects of an interest rate hike in South Africa: fewer people can qualify for a bond, so more of them turn to renting instead.
It's worth keeping this in context. The current interest rate in South Africa is still below the long-term historical average of 15% to 16%, and lending conditions remain favourable, with banks continuing to approve a high proportion of home loan applications. In other words, rising interest rates haven't shut the door on property investment, they've shifted where the opportunity sits.
Industry expert Charl van Niekerk is optimistic about where this leaves rental property investors. As confidence slowly returns to the South African real estate sector, he points to stronger rental demand paired with a tighter competitive supply of rental units.
Rising interest rates can actually work in an owner's favour on the rental side for an investment property:
One of the biggest advantages of buy-to-let property is the ability to generate wealth through rental income, even while interest rates are elevated. An investor who buys a property to rent out can use that rental income to cover a portion, sometimes all, of the monthly bond repayment. Over time, this effectively turns the property into a forced savings vehicle that grows in value, without requiring significant additional capital from the owner.
In uncertain times, it helps to remember the old saying: a bird in the hand is worth two in the bush. Rather than waiting to see what happens next, many investors are choosing to act now, while interest rates remain below their historical peak and rental demand is climbing. The future of the interest rate cycle is never fully predictable, but investing while conditions are still favourable positions buyers to benefit from both rental income and capital growth over the medium to long term.
Note: San Ridge Heights Apartments is now fully sold out and is featured here as a case study in successful buy-to-let performance, not as a current listing.
San Ridge Heights Apartments, located in the heart of Midrand near the N1 and the Gautrain station, was developed as an affordable buy-to-let option in a high-demand rental node. This is precisely the kind of asset that performs well during periods of rising interest rates. Investors who purchased in the development achieved an ROI of 15.5%, a net rental return of 7.3%, and projected capital growth of 8%, illustrating the kind of returns available on well-located, tenant-in-demand stock even in a higher-rate environment.
If you're looking for a similar opportunity today, explore our current available developments for live investment stock in high-demand rental nodes.
Yes. While a rate hike raises borrowing costs, it also pushes more people into the rental market, strengthening rental demand and reducing vacancy risk for buy-to-let investors.
Higher interest rates typically reduce affordability for first-time buyers, shifting demand toward rentals. For existing and new property investors, this often means stronger rental income potential and easier rent increases, even if new bond repayments are higher.
No. The current rate remains below South Africa's long-term historical average of 15% to 16%, and bank approval rates for qualifying applicants remain favourable.
Affordable, well-located units in high-demand rental nodes, close to transport links and employment hubs, tend to perform best. They attract the growing pool of tenants who can no longer afford to buy.
Waiting carries its own risk, since rental demand and prices can continue climbing in the interim. Many investors choose to buy while conditions remain favourable rather than trying to time the exact bottom of the rate cycle.
Ready to invest in a high-demand rental node? Contact Central Developments to find your next investment opportunity.
