Good news for South Africa’s property market – with a catch

While South Africans can expect a cautious property recovery in 2026, with modest price growth and easing interest rates, experts urged buyers and sellers to remain careful.

“While we most likely won’t have a property boom this year, we’re seeing very encouraging early signs of recovery,” said Sentinel Homes managing director Renier Kriek.

However, he warned that some constraints persist, which means that buyers and sellers must do their due diligence and carefully consider before leaping into heady, optimism-driven property transactions.

With government reforms starting to bear fruit, business and consumer confidence in the economy are improving.

The South African Reserve Bank (SARB) has also reduced interest rates by a cumulative 1.50% since September 2024, which further stimulates the economy and benefits the property market.

However, the Prudential Authority, which regulates South Africa’s banks, has implemented the “output floor” requirement of Basel 4, which increases the minimum capital banks must hold.

This will impact the cost of funding for banks and, therefore, the rates they can charge, for instance, on home loans.

While the precise impact remains to be seen, this regulatory change may prove a significant headwind for the property market in the near term.

There will likely be a greater appetite to lend as metrics improve, but GDP growth and economic expectations remain muted, even if more positive than before.

As such, Kriek said South Africans should not expect a sudden surge in the property market. The key shifts will likely be in home loan terms and rates, and higher loan-to-value approvals with sharper discounting, especially for prequalified buyers.

In addition, the year will likely see a continuation of the two-speed market South Africa has experienced for the past decade.

Coastal areas and semigration destinations are showing robustness, while inland areas and localities with perceived poor service delivery lag.

The market cycle and interest rates

South Africa’s property market is moving from stagnation – even deterioration in some areas – to an early stage of recovery, Kriek explained.

This is clearly indicated by increased home loan approvals, improved terms and higher first-time buyer participation.

However, those positive developments have not been broad-based and largely reflect higher-income groups, whose increased home-buying appetite is likely a leading indicator of a significant upswing to come.

There’s greater interest in buying to let as well, especially among younger consumers following advice from TikTok “finfluencers”.

The online advice includes such sage strategies of buying to let in affordable or middle-class neighbourhoods, while renting a primary residence in a more aspirational suburb.

However, despite these encouraging developments and indicators, broader employment and vastly improved service delivery are required to drive a real upswing in the market.

Positively, Kriek said that inflation is muted. Upward pressure is coming mostly from food inflation due to the foot-and-mouth disease epidemic, which is affecting meat prices but is not spending-driven.

The rand is also strong against the basket of international currencies, and oil prices – a significant input into inflation expectations – are low.

Accordingly, the SARB likely has room for cutting the repo rate further. “We expect to see at least two rate cuts at a minimum of 25 basis points each this year,” Kriek said.

This will bring the total interest rate relief to 2% since the SARB started rate cutting, which could significantly stimulate the economy.

“We still view the current interest rate as far too hawkish and the real interest rate as inexcusably high, even puzzling, given the state of the economy and the improved inflation outlook,” he said.

Property price trends

Kriek stressed that, unless someone is living in Cape Town, they should not expect a property market boom in 2026.

Recent growth numbers for the Mother City show annualised property price increases of around 9% compared to Gauteng’s 2% and the national average hovering at around 4%, just slightly higher than inflation.

Kriek said that coastal and lifestyle property prices will stay relatively high, while inland markets will be driven by value for money.

“As rates ease, don’t expect to see major price spikes. It’s initially going to be better conversion and affordability, and higher transaction volumes, followed by gradual price firming,” he said.

Increased competition among home loan providers will lead to higher approval rates, while growth will be concentrated in areas where services, lifestyle, and stock availability meet demand. However, stock constraints remain significant.

As a result of perceived affordability constraints and limited stock, there have been populist calls for demand-side measures, such as rent control or regulation of short-term letting and Airbnb.

Kriek said these cries will likely have some success in 2026, a year of local government elections and the associated vote-seeking behaviour.

For South Africans deciding whether to buy, sell or hold property in 2026, he explained that the decision is very personal and depends on the circumstances of a particular region or submarket.

Given the high variance across areas and price classes, there is no general advice in this regard. However, Kriek stressed that any decision should be made with due diligence, sound financial advice and planning, and an eye on long-term value.

“Keep an eye, especially, on the tax and transaction cost aspects. These will make you poor without you realising, unless you are thoughtful and plan appropriately,” he warned.

Kriek advised that consumers should build an affordability buffer because, though interest rates are going down, they will, by the same token, also go up again in the future.

However, for those who have been sitting on the fence waiting for times to change before making a large capital commitment, like buying a house, the time is likely now.

In an economy such as South Africa, where GDP growth is low but the real return on capital is high, the rational consumer should seek a large capital base as quickly as possible, Kriek said.

Residential property, which offers the potential for relatively low-risk leverage, is a key ingredient in adopting an appropriate financial posture.