Nicky Weimer
Nedbank’s Chief Economist
The South African economy finds itself at a crossroads in an era characterised by global economic turbulence and local challenges. As we navigate 2025, two overarching themes are becoming increasingly evident: the global financial implications of Donald Trump’s return to the White House and the persistent structural challenges within South Africa. These elements shape the economic landscape with rippling effects on the property sector.
Global Dynamics: The Trump Administration’s Policies
Donald Trump’s return to the presidency has brought back familiar policies with new vigour, markedly affecting global economic dynamics. At the heart of his administration’s agenda are four pillars: tax relief, deregulation, government efficiency under the Department of Government Efficiency led by Elon Musk, and controversial immigration and tariff policies.
Nicky Weimer, Nedbank’s Chief Economist, says, “The first two pillars—tax relief and deregulation—are intended to stimulate economic growth by reducing costs and boosting investment. In the short term, these measures can invigorate the U.S. economy, as seen with the IMF revising U.S. economic growth up to 2.7%. Nevertheless, these gains could be counterbalanced by the latter two pillars: tariffs and stricter immigration controls, which carry inflationary risks.
The re-escalation of trade wars, mainly with China, illustrates this. Trump’s administration has imposed a 10% tariff on select Chinese imports and a universal 25% tariff on steel and aluminium. If retaliatory measures ensue, it could lead to stagflation—a scenario reminiscent of the 1970s and 1980s, where tariff wars spurred global inflation, eroded economic momentum, and caused interest rates to soar to break inflationary expectations.”
Weimer adds, “Simultaneously, Trump’s strict immigration policies may exacerbate labour shortages, inflating wage demands and, consequently, consumer prices. While these policies may buoy the dollar, making imports cheaper, they inadvertently weaken the tariff’s intended impact and contribute to global inflationary pressures.”
Local Realities: South Africa’s structural challenges
Amid this global turbulence, South Africa faces its own set of structural impediments. Years of underinvestment have worn down essential infrastructure, constraining economic potential. Challenges persist despite marginal gains, such as improvements in Eskom’s electricity availability factor and private sector involvement in the energy grid expansion. Infrastructure deficiencies in Transnet services and burgeoning water issues compound these constraints.
Economically, South Africa has returned to pre-pandemic GDP levels, but growth is sluggish, with domestic demand remaining flat. Fixed investment—a crucial growth catalyst—remains subdued.
“South Africa’s economy has surpassed pre-pandemic GDP levels; however, growth has stagnated, moving sideways without substantial momentum. The key issue lies in the limited sources of demand, with both exports and imports declining, though exports are dropping more swiftly, resulting in a net negative impact on the economy. This ongoing drag is expected to persist, neutralising any potential boost. In the meantime, domestic demand, illustrated as a green line, remains the only sustaining factor. Nevertheless, it is essentially flat, growing at a positive but insufficient rate to create the necessary momentum for strong economic growth,” says Weimer.
While there is a focus on infrastructure reforms, mainly through increased fixed investment, the pace and magnitude remain insufficient to fuel robust growth.
Weimer observes, “The property sector reflects this economic climate. The revival in commercial mortgages towards the latter half of 2023 suggested optimism, yet home loan uptake continues to taper. Despite favourable nominal interest rates, this hesitation among consumers points to underlying cautious sentiment amid global uncertainties.”
Consumer influence in the property market
South Africa’s consumers have traditionally been resilient spenders, aiding economic activity. Encouraging signs have emerged as household incomes began to grow in real terms during the second half of 2023. Retail sales figures were strong towards year-end, with October witnessing nearly 10% growth and November 7.7%.
However, despite these positive indicators, real interest rates adjusted for inflation remain high, exerting pressure on consumer expenditure. For many, though beneficial, the reduction in nominal interest rates is overshadowed by persistent debt-servicing costs, which consume almost 8% of household income.
Housing prices showed incremental improvement, particularly in the affordable to mid-value market segments. Prospective buyers remain cautious, with an eye on inflation trends and interest rate trajectories. Inflation fell below the South African Reserve Bank’s target of 4.5%, reaching 3%, yet it’s anticipated to rise modestly, fueled by increasing goods prices and food inflation.
Balancing short and long-term risks
From an economic standpoint, Weimer points out, “South Africa’s path to sustained economic growth requires strategic navigation in this complex web of global pressures and local challenges. Though these are long-term projects, the government has committed to addressing structural reforms within municipal sectors and infrastructure, particularly water and crime.
As the economy navigates this uncertain terrain, the Reserve Bank is cautious, contemplating modest rate cuts while vigilantly assessing global cues. Future interest rate policy will need to balance encouraging domestic economic activity with safeguarding against imported risks, particularly those from Trump’s trade policies, which exert inflationary pressures through a strong dollar.”
In summary, both global forces influenced by Donald Trump’s policies and local structural impediments cast long shadows over South Africa’s economy and the property sector. The immediate future may offer slight enhancements in GDP growth and consumer spending; however, sustainable progress hinges on decisive infrastructure investments and prudent fiscal management against global uncertainties. The property market may see marginal upward trends contingent on these broader economic developments, particularly house prices. Through careful navigation of international and local dynamics, South Africa can carve a path toward more stable, inclusive growth in the years ahead.
