By Marnitz van den Bergh, Senior Commercial Property Broker and Co-founder of Brightwave Commercial Property.
Information checked: 24 September 2026. This article records the September 2026 decision; it is not a live interest-rate feed.
The September 2026 repo rate increase raises an important question for Cape Town commercial property: what changes in the actual numbers behind a purchase, an investment or a lease? The South African Reserve Bank announced a 25-basis-point increase on 23 September, taking the repo rate from 7.00% to 7.25%, effective 25 September 2026. SARB's September statement confirms the decision and effective date.
My starting point is to separate three things: the property's operating income, the owner's financing costs and the tenant's lease obligations. A change in one does not automatically change the others. For a buyer or landlord with variable-rate debt, finance costs can rise. For a tenant, the signed lease still needs to be checked before assuming the monthly rental has changed.
September 2026 repo and prime rates at a glance
SARB repo rate: 7.00% before 25 September 2026, increasing to 7.25% from that date.
Prime lending rate published by Nedbank: 10.50% before 25 September 2026, increasing to 10.75% from that date.
Size of the increase: 25 basis points, or 0.25 percentage points. This is not a 25% increase.
Nedbank's rate notice confirms the new prime rate and 25 September effective date. The announcement and implementation are different dates: on 24 September, the new rates had been announced but were not yet effective. SARB cites upside inflation risks in explaining its decision. That is context, not evidence that every Cape Town property's rent or value has changed.
How does a repo rate increase affect commercial property finance?
The repo rate is not the rate automatically charged on a commercial property loan. Prime is a lending benchmark, and the bank's actual offer can include a margin above or below that benchmark. Standard Bank explains the distinction between prime-linked and fixed-rate borrowing.
For illustration, a facility priced at prime plus one percentage point would move from 11.50% to 11.75% if prime rises by 0.25 percentage points and the contractual margin remains unchanged. This is a calculation assumption, not a quoted commercial lending rate or an indication that a particular borrower qualifies.
A fixed rate does not move during its agreed fixed period, although the facility may reprice when that period ends. Ask the lender to confirm the outstanding balance, rate type, margin, reset date, remaining term and revised repayment schedule. Do not assume every variable-rate product changes the instalment in the same way. For example, Standard Bank's business term-loan description says prime changes affect that product's term rather than its agreed monthly repayment. The specific facility agreement matters.
Worked example: the extra monthly interest
The following calculations isolate the additional interest on an unchanged, interest-only outstanding balance, assuming the full 0.25-percentage-point increase passes through.
R2 million loan: R5,000.00 additional annual interest, averaging R416.67 a month.
R5 million loan: R12,500.00 additional annual interest, averaging R1,041.67 a month.
R10 million loan: R25,000.00 additional annual interest, averaging R2,083.33 a month.
Method: outstanding balance × 0.0025 ÷ 12. These are annualised monthly averages, not a bank's daily-accrual calculation. They exclude principal repayments, fees, tax and changes in the balance. They are not the instalment increases on a capital-and-interest bond.
For comparison, an illustrative R5 million loan amortised through 180 equal monthly payments would cost about R58,409.49 at 11.50%, compared with R59,206.57 at 11.75%: an increase of approximately R797.08 a month. This uses the standard monthly annuity calculation, the same opening balance and remaining term, no balloon payment, and no fees. Each rate is held constant within its scenario. Actual lending terms and interest-accrual conventions can produce different figures.
Buyers and owner-occupiers: compare the full cost of the premises
I would not decide to buy or continue renting from the repo-rate headline alone. I would obtain a written finance quotation and compare suitable premises over the same holding period.
On the ownership side, allow for the deposit and acquisition costs, debt service, municipal charges, levies where applicable, insurance, maintenance and fit-out. Also recognise the working capital tied up in the purchase. On the leasing side, include the agreed rental, escalations, parking, recoverable operating costs, deposit, fit-out and any reinstatement obligation. These are items to verify, not an assumption that every charge applies to every property.
For a cash-flow comparison, include the full loan repayment. For an economic comparison, distinguish interest and operating expenses from principal repayments, which reduce debt. Otherwise, the comparison can incorrectly treat equity-building repayments as equivalent to rent. Use consistent tax assumptions with your accountant rather than assuming the VAT or tax treatment is identical.
Test how both options behave if the business needs more space, must relocate or has a weaker trading period. Brightwave's commercial property buying guide provides a broader due-diligence framework. The right choice still depends on the business, the actual property and the finance terms.
Landlords and investors: yield is not cash left after the loan
In a simple property model, net operating income, or NOI, is rental and other property income less property operating expenses, before financing costs and tax. Increasing the owner's loan interest does not, by itself, reduce that NOI. At an unchanged purchase price, it also does not mechanically alter the property's unlevered income yield. What it changes is the cash remaining after finance costs.
Consider this entirely hypothetical investment, not a Brightwave transaction or a Cape Town yield benchmark. Assume monthly NOI of R60,000.00 and an unchanged interest-only loan balance of R5 million.
At 11.50%: average monthly interest is R47,916.67, leaving R12,083.33 before tax, capital expenditure and principal repayments.
At 11.75%: average monthly interest is R48,958.33, leaving R11,041.67 before those same items. The property's NOI remains R60,000.00 in both scenarios.
The residual cash falls by R1,041.67, or about 8.62%, even though the lending rate moved by only 0.25 percentage points. The percentage change is calculated against the previous residual cash, not against the property value or the loan. That is why I would examine the cash buffer as carefully as the advertised yield.
Check the rent roll against signed leases and actual collections. Then test lease expiries, tenant concentration, non-recoverable expenses, repairs and a realistic vacancy allowance. For an amortising loan, include principal as well as interest in the cash-flow test. A stress test with higher borrowing costs is a planning scenario, not a prediction of SARB's next decision.
Does the repo rate increase automatically increase commercial rent?
Not simply because the landlord's borrowing cost has risen. Start with the lease's rental-adjustment clauses. A fixed annual escalation, a CPI-linked adjustment and an expressly interest-rate-linked mechanism are different arrangements. Barter McKellar's explanation of commercial lease escalations illustrates why the agreed formula, caps and adjustment dates need careful attention.
Take a hypothetical lease with a fixed 6% annual base-rental escalation and no other clause permitting a base-rental adjustment. A 0.25-percentage-point repo increase does not turn that agreed 6% into 6.25%. This example depends on those stated terms; it is not a legal conclusion about an unseen lease.
Check parking charges, recoverable costs, renewal provisions and overdue-interest clauses separately. A prime-linked arrears-interest clause concerns overdue amounts, not necessarily the ordinary base rental. Obtain legal advice where the wording is disputed. Brightwave's commercial lease audit checklist can help organise the documents and billing questions.
What to check in Cape Town's office, industrial and retail markets
A national rate change is a reason to revisit the numbers, not to treat every local property as interchangeable. I would tailor the assessment to how the premises will actually be used.
Offices in Century City, Tyger Valley or Cape Town CBD: compare the usable layout, parking costs, fit-out requirements, power arrangements and the total monthly occupancy budget. A lower asking rental does not establish a lower total cost if the alternative needs materially more fit-out or additional space. Test the two actual options rather than assuming an area-wide outcome.
Industrial premises in Brackenfell or Stikland: check the business's required power capacity, loading access, yard arrangements, storage configuration and any adaptation costs. In a buy-versus-rent assessment, price those requirements alongside finance rather than treating the advertised price per square metre as the complete decision.
Retail premises in Bellville or Durbanville: test the store's occupancy budget against its own sales assumptions, fit-out spend and required cash reserve. Where turnover rent or particular recoveries apply, model the actual lease formula. Do not substitute a national interest-rate headline for site-specific trading evidence.
These are assessment questions, not claims that rentals, vacancies or achievable selling prices in those locations changed after the announcement. For more detailed local office context, see the Durban Road office-space guide, checking any dated asking figures against current availability before relying on them.
Sellers: prepare the evidence rather than assume a discount
A buyer's financing model may change without establishing a new market value for your building. I would prepare the signed leases, collections history, operating expenses and known capital-work requirements, then assess offers against sustainable income and relevant comparable transactions.
In a simple income-capitalisation model, a higher required yield produces a lower indicated value when NOI is held constant. But the repo rate is not itself the property's capitalisation rate. There is no arithmetic rule that a 25-basis-point repo increase requires a 25-basis-point cap-rate change or a fixed percentage reduction in every asking price.
Frequently asked questions
What repo and prime rates were announced in September 2026?
SARB announced a repo rate of 7.25%, and Nedbank published prime at 10.75%, both effective 25 September 2026. These are the September snapshot, not a guarantee of the rates applying when you later read this article. The official sources are linked above.
How much extra interest does a 0.25-percentage-point increase add to R1 million?
Approximately R208.33 a month on an unchanged interest-only balance: R1,000,000 × 0.0025 ÷ 12. An amortising loan's instalment change requires a separate calculation.
Does a higher repo rate mean commercial property prices will fall?
The announcement alone does not establish that result. Compare the property's sustainable income, required return and relevant transactions. Changes in borrowing costs are an input to that assessment, not proof of a particular sale price.
Should a business buy or rent after the rate increase?
Compare the actual finance quote and ownership costs with the complete lease commitment, using suitable premises and the same planning period. Include flexibility and working capital. Neither option is automatically preferable because of this single rate decision.
When should this article's figures be reviewed?
SARB's published MPC calendar lists the next announcement for 19 November 2026. Review the rate snapshot after that announcement, and confirm your lender's rate and effective date whenever pricing a transaction.
Put the rate change into your property's numbers
Whether you are assessing a purchase, reviewing an investment or planning a lease, start with the actual premises, documents and cash flow. At Brightwave Commercial Property, we can help compare property options and organise the premises-cost assessment. Your bank should confirm lending terms, your accountant the tax treatment, and your attorney the legal implications of the agreements.
Sources and calculation notes: Rate information was checked on 24 September 2026 against the linked SARB statement and Nedbank notice. The linked Standard Bank material supports the explanation of lending structures, and the legal-practitioner source explains escalation mechanisms. All worked examples are original illustrative calculations, rounded to cents, not loan quotations, valuations, rental comparables or observed client transactions. No post-announcement change in Cape Town rental levels, vacancies or selling prices is claimed.
This article is general commercial-property information, not personalised financial, investment, tax or legal advice. Confirm the applicable rates and obtain advice on your particular transaction before committing.
