Interest Rates Are Rising Again — So Why Is Cape Town Property Still Holding Its Ground?

Interest Rates Are Rising Again — So Why Is Cape Town Property Still Holding Its Ground?

South African property owners received another reminder of the changing economic landscape in September when the Reserve Bank increased the repo rate by 25 basis points to 7.25%, taking the prime lending rate to 10.75%.

The Reserve Bank is also forecasting economic growth of only around 1.2% for 2026, while inflation is expected to remain above 5% into the first half of 2027.

On paper, these conditions should make life considerably more difficult for the property market.

Cape Town, however, continues to be something of an exception.

Across many parts of the Western Cape, a shortage of available property is meeting sustained buyer demand. For correctly priced sellers, this can mean strong interest despite higher borrowing costs.

It is an important distinction: higher interest rates do not automatically translate into lower property prices — particularly where demand continues to exceed available supply.

For buyers, affordability is undoubtedly more important. Bond repayments are higher and careful budgeting is essential, but waiting indefinitely for dramatically cheaper Cape Town property could carry its own risk in areas where stock remains limited.

For sellers, this is not a market for unrealistic pricing. Buyers are more financially conscious and selective, but desirable, correctly positioned properties can still compete strongly.

The investment picture is equally interesting. Western Cape rentals increased by 9.7% year-on-year in Q2 2026, according to PayProp, with the province recording the strongest rental growth in the country.

For landlords and investors, that points to continued rental demand — although higher finance, maintenance and ownership costs mean that purchasing the right property at the right price remains crucial.

Ultimately, Cape Town is not immune to South Africa’s economic pressures. But limited supply, lifestyle demand and a strong rental market are helping it behave differently from many other parts of the country.

In this environment, understanding what is happening at suburb level matters more than ever.

Thinking of Buying, Selling or Investing?

Property markets can change dramatically from one suburb — and even one street — to the next.

Whether you’re considering selling, looking for your next home, reviewing an investment property or simply wondering what your property could be worth in today’s market, speak to your local Century 21 property professional for informed, area-specific advice.

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