South Africa’s property market going from bust to boom

South Africa’s housing market is entering a new cycle in 2026, with improving affordability, stronger household balance sheets, and supportive macroeconomic conditions driving a gradual recovery.

This was revealed in FNB’s Property Barometer report, which stated that the South African housing market enters 2026 at a critical cyclical turning point.

Following the post‐pandemic tightening cycle, the country’s property market has been through a prolonged adjustment phase.

Now, market conditions are shifting from a period characterised by supply‐led price resilience toward a phase of gradually improving and increasingly broad‐based demand.

This transition follows what was effectively a consolidation year in 2025, during which household balance sheets stabilised, inflation declined sharply, and monetary policy began to ease more meaningfully.

Importantly, the emerging recovery reflects strengthening fundamentals rather than speculative excess.

Affordability conditions are improving, real incomes are recovering, and new credit growth is increasingly concentrated among higher‐quality borrowers.

Collectively, these developments suggest that the housing market is entering a more sustainable expansion phase, with activity expected to drive price growth through 2026.

FNB revealed that the macroeconomic environment has also become decisively more supportive of housing market conditions. Headline inflation averaged 3.2% in 2025, the lowest level in over two decades.

It is expected to remain anchored close to the South African Reserve Bank’s (SARB) 3% inflation target through 2026, averaging around 3.1%.

This disinflation has created space for the SARB to continue loosening the grip of monetary policy on activity.

FNB said it expects a cumulative 50-basis-point reduction in interest rates during 2026, with the risk of further easing should inflation dynamics prove more favourable than anticipated.

Lower policy rates would materially ease monthly debt‐servicing costs, improve affordability, and increase housing demand. Crucially, these gains follow a period of household balance‐sheet repair.

Credit data from late 2025 point to strong new lending alongside subdued growth in net household debt, suggesting the housing market is increasingly underpinned by less-leveraged, higher-quality borrowers.

This shift in the composition of credit growth suggests that the next phase of the housing cycle is likely to be more resilient to shocks.

Demand is supported primarily by income growth and improved affordability rather than by leverage expansion.

From a housing market perspective, the significance of this macro shift lies less in stimulating speculative demand and more in restoring confidence.

Improved affordability encourages households that postponed purchasing decisions during the hiking cycle, particularly first-time buyers and upgrading households, to re-enter the market.

However, the bank added that a stronger macroeconomic outlook will also spur investor-driven demand.

Rising demand and constrained construction

Against this backdrop, FNB said the macro environment now supports a gradual recovery in housing demand, rather than a rapid or debt‐driven upswing.

Housing market activity indicators have begun to respond to the improving macro and affordability backdrop.

Estate agent sentiment strengthened materially late in 2025 – 75% in the fourth quarter of 2025 – signalling improved selling conditions, increased buyer enquiries, and reduced selling times.

In line with historical patterns, activity is expected to recover ahead of prices, with transaction volumes likely to lead the cycle during 2026. This sequencing is characteristic of early‐stage housing market recovery.

Initial affordability gains are typically absorbed through higher market turnover rather than immediate price acceleration.

This is particularly the case in an environment where household caution remains elevated after a prolonged period of tightening.

As such, rising activity should be interpreted as a healthy signal of cyclical normalisation, rather than an indication of overheating.

On the supply side, FNB said new residential construction activity continues to operate well below long‐term norms.

However, it remains constrained by weak developer confidence, elevated building costs, and limited appetite for speculative development.

As a result, the housing market faces no material risk of oversupply, even as demand gradually improves. Cyclically, housing completions improved in the latter part of 2025, largely driven by increased apartment supply.

According to FNB, this may reflect a waning demand for larger work-from-home spaces and entry-level (small) standalone housing.

This likely indicates sustained demand for more affordable units. Nevertheless, overall construction conditions remain subdued.

The FNB Building Confidence Index remained deeply negative at ‐37 in the fourth quarter of 2025, and despite some late‐2025 improvement, weak order books suggest that construction activity will remain constrained in the near term.

These supply constraints continue to provide a floor for house prices, limiting downside risks and ensuring that improving affordability translates primarily into higher activity rather than price correction.

When it comes to house price growth, FNB said that the market reached a cyclical high of 5.3% y/y in October 2025 and averaged 3.8% for the year.

Following this, the bank explained that nominal house price inflation could moderate into a 3.5% to 4.5% range in 2026.

However, this remains above its inflation forecast of 3.1%, implying continued, albeit modest, real house price appreciation.