South Africans should be cautiously optimistic about the local property market in 2026, though it’s a story of green shoots and a two-speed market.
“While we most likely won’t have a property boom this year, we’re seeing very encouraging early signs of recovery,” says Renier Kriek, Managing Director of innovative home loan provider Sentinel Homes.
However, some constraints persist, so buyers and sellers must do their due diligence and carefully consider before leaping into heady, optimism-driven property transactions.
Financing and mortgage conditions
With government reforms starting to bear fruit, business and consumer confidence in the economy is improving accordingly.
Also, SARB has 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 SA 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 that they can charge on, for instance, 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 greater appetite to lend as metrics improve but GDP growth and economic expectations are still muted, even if more positive than before.
As such, don’t 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.
For the balance, the year will likely see a continuation of the two-speed market we have experienced in South Africa for the past decade or so, with coastal areas and semigration destinations showing robustness while inland areas and localities with perceived poor service delivery lag.
The market cycle
The property market is moving from stagnation – even deterioration in some areas – to an early stage of recovery. 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 reflects the 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 your 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.
Interest rates
Inflation is muted, with upward pressure coming mostly from food inflation due to the foot-and-mouth disease epidemic, which impacts meat prices but is not spending driven inflation. The rand is also strong against the basket of international currencies and the oil price – a significant input for inflation expectations – is 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,” says Kriek. This will bring interest rate relief to 2 percent in total since SARB started rate cutting, which could stimulate the economy significantly.
“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,” says Kriek.
Property price trends and forecast
Again, don’t anticipate a property market boom – unless you live in Cape Town. Recent growth numbers for the City show annualised property price increases of around 9% compared to Gauteng’s 2% and the national average hovering around 4% (just slightly higher than inflation).
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,” says Kriek.
Increased competition between home loan providers will mean higher approval rates, while growth will be concentrated in areas where services, lifestyle and stock availability meet demand.
Yet, stock constraints remain significant. As a result of perceived low affordability and stock, there have been populist outcries for demand-side measures, like rent control or regulation of short-term letting and Airbnb. These cries will likely have some success in 2026, a year of local government elections and the associated vote seeking behaviour.
Buy, sell or hold
Should South Africans buy, sell or continue to hold onto what they have?
“It would be irresponsible to suggest a generalized course of action now because this is a very personal decision that depends on the micro-circumstances of a particular region or submarket within which a property exists, precisely because there is such a high degree of variance between areas and price classes,” says Kriek.
However, any decision should be carried out with due diligence, good financial advice and planning, and an eye on long-term value. “Keep an eye, especially, on the tax and transaction cost aspects,” advises Kriek. “These will make you poor without you realising, unless you are thoughtful and plan appropriately.”
Kriek advises further that consumers should building an affordability buffer because, though interest rates are going down, they will, by the same token, also go up again in the future.
Nevertheless, if you 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.
And, in an economy such as ours in South Africa, where GDP growth is low, but the real return on capital is high, the rational consumer should seek as large a capital base as possible as quickly as possible. R
esidential property, which comes with the possibility of relatively low-risk leverage, is a key ingredient in adopting the appropriate financial posture.
This contains general observations regarding personal financial planning and savings but is not intended as financial advice. Consumers should instead seek personalised guidance from licensed and regulated individuals.