From repo to rent – how interest rate fluctuations impact landlords and tenants
The positive interest-rate outlook for 2026 brings good news for tenants and landlords alike. While tenants get to make the most of greater financial freedom, as well as an easier path to homeownership if they choose, landlords may benefit from reduced rental arrears and a more stable environment that will support further investments.
On the flip side of the coin, rising interest rates create challenges for both landlords and tenants. Jawitz Properties takes a close look at interest rate trends and how they impact the real estate rental market.
Predictions for SA’s interest rate in 2026
First things first: what is the outlook for South Africa’s interest rate in 2026? We moved into this year on a positive note, with rate cuts being resumed at the November 2025 meeting of the Monetary Policy Committee (MPC). Economic and market analysts widely expect more cuts to the repo rate this year, due to lower inflation and the SARB’s new inflation target of 3%. There is growing expectation among various experts that interest rates may be cut in small increments during the year, potentially resulting in a lower repo rate by the end of 2026.
Why potential interest rate relief matters for landlords and tenants
Even modest interest rate relief can have a meaningful impact on the rental market. Lower borrowing costs may give tenants greater financial flexibility, supporting more stable rental payments for landlords.
The most recent PayProp Rental Index reveals that the average tenant spent 46.1% of their income servicing debt, compared to 28.8% on rent. A lower debt burden would help rebalance household budgets, particularly for tenants managing multiple financial commitments.
For landlords with financed properties, any easing in borrowing costs may help lower monthly bond repayments, supporting healthier cash flow and returns. Lower interest rates also make financing new rental property purchases more attractive, meaning that 2026 could be an ideal time to expand their property portfolios.
For investors, lower interest rates create an encouraging environment. According to Ynnis Willson, Jawitz Properties’ Head of Rentals, lower interest rates present attractive opportunities for disciplined investors, with the potential for improved performance, particularly in high-demand areas. “However”, she adds, “rising operating costs, municipal charges, and ongoing maintenance continue to place pressure on margins. In this evolving environment, professional advice is essential."
At face value, one might think that a lower interest rate may lead to lower demand for rental properties. However, given that South Africa faces significant housing affordability challenges, many people stay in rental accommodation rather than becoming homeowners. Also, since the Reserve Bank proceeds with caution and cuts rates by just 25 or 50 basis points at a time, it takes most tenants a long time to recover from the impact of high interest rates enough to consider becoming homeowners.
Rising interest rates: what are the implications?
If bond repayments rise due to potential interest rate increases, some buyers might delay purchasing property and stay in the rental market longer. This can support demand for well-located, quality rental homes. In areas where demand is strong and supply is limited, landlords might have some flexibility when setting rental prices, although it is always advisable to connect to a property practitioner before taking such action.
Rising interest rates can make borrowing more expensive, particularly for first-time buyers, which may slow property market activity. For tenants and landlords, understanding these shifts early can help in making smart financial decisions and finding the best opportunities.
Willson concludes: "Over the past few years, rising interest rates have compelled many investors to reduce the size of their property portfolios. This contraction has, in turn, driven increased rental demand, particularly within select areas and high-performing locations. With the current lending environment now significantly more favourable, the buy-to-let market has strengthened and presents a compelling opportunity for investors seeking to enter or expand within the sector. Now is the time to engage with a trusted property professional to gain area-specific insights, assess true rental performance, and make informed investment decisions before taking your next step."
With the current interest rate outlook, 2026 could be a favourable time for South Africans exploring property investments, whether stepping onto the property ladder for the first time or expanding a buy-to-let portfolio. Connect with the Jawitz Properties team to discuss opportunities in today’s market and make informed decisions about your next investment.