South Africa’s Housing Market: Momentum Building for a Strong 2026

South Africa’s residential property market appears to be entering a new phase of recovery, with improving economic conditions and growing buyer confidence pointing towards renewed momentum in 2026. Lower interest rates, stabilising fundamentals and increased investor optimism are laying the groundwork for a more active market after several challenging years.

According to BetterBond’s National Head of Sales, Bradd Bendall, the outlook for homeowners and prospective buyers is far more encouraging than it was just a year ago. He notes that a combination of positive developments — including South Africa’s removal from the Financial Action Task Force (FATF) grey list after more than two years of reform efforts, along with a firmer rand — has helped restore confidence across the property sector.

Recent figures from BetterBond’s November Property Brief support this renewed optimism. Home loan applications have climbed by around 30% from their 2023 low point, reaching the highest levels seen in the past two years. Activity is now edging closer to what the market experienced before the slowdown in 2023.

Economic signals point to recovery

Several broader economic indicators suggest that the recovery is not limited to property alone:

• S&P Global has maintained a positive outlook on South Africa’s local currency debt, with the potential for an upgrade linked to ongoing fiscal improvements and reform progress.

• The 10-year government bond yield has declined by approximately 225 basis points since April, signalling improved investor sentiment and expectations of a more supportive monetary policy environment.

• Manufacturing sales reached close to R300 billion in August — the strongest performance since late 2023 — while wholesale trade is expected to approach R1 trillion in the final quarter of 2025.

• Increased foreign investment, particularly from the European Union and development finance institutions, is driving energy and infrastructure projects.

• The South African Reserve Bank has revised its medium-term growth outlook, forecasting average real GDP growth of 1.8% between 2026 and 2028.

  
  

While interest rates remain significantly higher than they were four years ago, Bendall points out that the stabilising economy, falling inflation pressures and improving investor confidence have created room for further rate relief over time.

A cautious but improving interest rate environment

Despite the positive trends, some uncertainty remains. The Reserve Bank’s decision to target a 3% inflation anchor could result in a more restrictive stance if inflationary pressures resurface. This may limit the pace of future interest rate cuts.

That said, the recent easing cycle has already provided meaningful relief for homeowners and has helped draw new buyers back into the market. If this accommodative approach continues into 2026, it could further support demand and affordability across the housing sector.

First-time buyers leading the rebound

One of the most encouraging developments is the strong return of first-time buyers. Home loans in this segment have increased by 17.4% year-on-year, a substantial improvement compared to growth of just 3.3% between 2023 and 2024.

Most first-time buyer activity is concentrated in Johannesburg’s south-eastern suburbs, with the Western Cape accounting for around 16% of BetterBond’s applications in this category.

Affordability has also improved as banks gradually relax lending requirements. Average deposits for first-time buyers have fallen by 21% since 2024 and by 26% from their peak in the second quarter of 2024. Lower upfront costs, combined with reduced borrowing expenses, are expected to continue stimulating demand as the market moves into 2026

Conditions still favour buyers

Although interest rate hikes in 2023 are still influencing the market, inflation-adjusted house prices remain slightly negative. Average purchase prices are holding steady at just over R1.6 million across all buyers, while first-time buyers are purchasing at an average of approximately R1.27 million.

In real terms, house prices have declined by around 2.1% since mid-2023, maintaining buyer-friendly conditions in many segments of the market.

At the same time, buyer incomes have grown faster than inflation across all age groups. The strongest growth has been among buyers aged 41 to 50, whose incomes have increased by more than 20% since 2023. Buyers aged 51 to 60 now show the highest affordability levels, with the ability to repay bonds on homes typical for their age group in under two years.

Looking ahead

With the potential for further interest rate cuts and improving economic fundamentals, the residential property market is well positioned to regain activity levels last seen before 2023. While risks remain, the overall trajectory points toward a more balanced, confident and accessible housing market in 2026 — welcome news for buyers, sellers and investors alike.