Important message for landlords in South Africa

In 2026, property investors need to prioritise existing, adaptable assets, strong municipal governance and rigorous tenant risk management in order to protect portfolio values, secure their income and achieve long-term returns.

TPN Credit Bureau director Waldo Marcus explained that property investors will be required to shift their focus in the coming year amid rising costs and regulatory pressure.

The 2026 municipal elections will be a pivotal factor in property success, with a primary focus on municipal finances and service delivery, leading to a shift of capital toward functionality.

“Regardless of the political outcome, winning parties will likely have to implement additional rates and tariffs to improve municipal liquidity and deliver basic services,” Marcus said.

“Developers, landlords, and investors will increasingly look for areas with demonstrable good governance and functioning infrastructure. This pursuit of stability will drive and inform new investment decisions.”

Areas that demonstrate a visible improvement in service delivery, including safety and security, could see a positive uptick in property values and sustainable property price recovery.

This is because investors are opting for value-for-money investments over expensive new builds to bolster affordable rental options.

According to Marcus, the value of a property portfolio will also increasingly be influenced by the tenant’s risk profile in 2026.

This will require landlords to utilise more sophisticated risk management. “A rental property’s true value is derived from the income stream provided by the tenant,” Marcus pointed out.

This is because probable capital growth could be easily affected by instability and the reality of informal settlements, which are becoming increasingly prevalent as inequality becomes more widespread in various areas.

“High-risk tenants will negatively impact property valuations, while tenants in good standing – those who consistently pay the full rental amount owed on time – should provide robust investment benefits,” he said.

According to Marcus, the increase in business rescues, despite a downward trend in liquidations, highlights this risk.

“The risk of unreliable tenants is particularly high in commercial properties where the value is banked on a single, large retailer. The future lies in diversified, multi-tenant portfolios to mitigate risk,” he said.

How property investors should approach 2026

Marcus said that in 2026, property investors should adopt a strategic, risk-mitigating approach focused on adaptation and resilience.

“The best value proposition lies in existing structures, with the intention of enhancing or renovating them. This mitigates the risk and high cost of new construction,” he said.

He added that investors should prepare as much as possible for new developments to ensure sufficient free cash flow to meet unforeseen liquidity demands.

To address the lack of municipal service delivery, landlords must factor in enhancements such as solar panels or inverters, water tanks, and sophisticated security measures.

These features, which were once secondary, are now essential for both residential and commercial properties. They also make properties more attractive to potential tenants.

“Commercial investment should focus on smaller, convenience-based retail centres and small industrial parks closer to suburban areas, guided by online retail and distribution logistics,” Marcus said.

“Given the direct impact of tenant risk on property valuation, rigorous tenant screening, continuous monitoring and proactive arrears management are non-negotiable for preserving portfolio value.”

According to Marcus, the 2026 property market will be less about aggressive expansion and more about strategic resilience and adaptation.

“With high construction costs restricting new supply and reactive regulation adding compliance pressure, successful investors will pivot their focus from greenfield developments to existing, adaptable assets,” he said.

Investors are now rushing to quality areas, driven by effective and predictable municipal governance and service delivery.

This means that property valuation is now inextricably linked to municipal and provincial governance and best practices.

“Ultimately, securing portfolio value in 2026 demands a dual focus,” Marcus said. First, investors must proactively manage tenant risk to maintain stable and consistent income streams.

Secondly, they must invest in property enhancements, such as solar and water solutions, to shield assets and tenants from broader infrastructure failures.

“The investor who can successfully navigate the constraints of supply and the pressures of governance is likely to see sustainable returns in the year ahead,” he said.