The war in the Middle East could dampen the willingness to invest in property or compress financial conditions enough to deter buyers who rely on continued improvements in disposable income.
Image: Niney Ruthnam
South Africa’s property market sentiment remains upbeat as the residential sector's recovery continues.
The country's sector entered 2026 with optimism, according to the FNB Property Barometer by Koketso Mano, FNB's senior economist.
“The South African reform-driven outlook, which should include lower living and borrowing costs, upheld a conducive financial cycle that would be fanned by improved sentiment as well as stronger balance sheets, built during the earlier phase of the interest rate cutting cycle.”
The economist says that in line with this, they anticipated an enduring recovery in the housing market, characterised by a rotation from supply‑led price growth toward a period of broadened and resilient demand.
“While the war in the Middle East is the most pressing risk to our outlook, we remain constructive on the SA narrative.”
The outlook for interest rates has become more complex in recent weeks as global developments could disrupt the downward trajectory many economists had anticipated for 2026, Adrian Goslett, CEO and regional director of REMAX Southern Africa, said earlier this week.
The South African Reserve Bank’s (SARB) Monetary Policy Committee will announce its next interest rate decision on Thursday next week (March 26).
The announcement will come at a time of global geopolitical tensions of a war in the Middle East, which introduces new uncertainty into the outlook for borrowing costs and the housing market.
The current, hopefully short-term conflict involving Iran is sending ripples through global markets, and African M&A is no exception, says Andrew Bahlmann, the CEO of Corporate & Advisory, Deal Leaders International.
He says for South Africa and the broader continent, this has both immediate challenges and potential opportunities.
“Macroeconomic pressures are clear: rising energy costs push inflation higher, weighing on consumer spending and corporate margins. In South Africa, the rand has lost some of its recent gains in response to geopolitical uncertainty, complicating cross-border deal pricing.”
The housing market recovery following the most recent interest rate hiking cycle has been gradual, initially catapulted by wealthier households and now diffused across price segments and areas, says Mano.
They said that while wealthier households would have been encouraged by reduced policy uncertainty and improved sentiment, higher disposable incomes bode well for the participation of many other households.
“There is a high likelihood that activity will lead to price appreciation in 2026. We therefore expect softer HPI growth initially, before an acceleration in 2027 and 2028. In February, the HPI recorded growth of 0.2% m/m and 5.4% y/y, which was slightly softer than 0.5% m/m and 5.5% y/y in January.
"Even as growth decelerated, it remained robust, beating inflation of 3.5% in January and the expected 3.2% in February.”
FNB says its constructive outlook has been confronted by significant risks. It says the most recent war in the Middle East could result in longer-term damage to oil-related infrastructure and logistics, which would keep prices elevated for a protracted period.
“As a net-importer of petroleum products, this poses upside risk to SA’s inflation outlook and could delay interest rate cuts, meaning it would take longer for monetary policy to shift to a more neutral stance.
"This would somewhat dampen the expected boost from financial conditions, and economic growth could be slower.”
Unfortunately, Mano says these developments often weigh on the willingness to make long-term investments.
“We continue to monitor developments around the war but maintain our view that SA’s focus on rebuilding state institutions, while creating a business-friendly environment that allows for competitive behaviour, is the best long-term strategy to reduce the economy’s vulnerability to external shocks.
"As we have seen since this war started, the rand has remained relatively resilient, upheld by less perceived risk associated with investing in SA.”
The bank’s 1Q26 Estate Agent Survey shows broad satisfaction with market conditions, with a 77% satisfaction rate across the market.
Satisfaction is also diffused, recording 78% in the affordable market and 77% for higher-priced properties, and at 86% in Gauteng (GP); 76% in the Eastern Cape (EC); 68% in the Western Cape
(WC); and 66% in KwaZulu-Natal (KZN). Properties are said to be spending about three-to-six months on the market, but the time is less, at one-to-two months, in many of the major provinces.
While agent sentiment is almost evenly split between viewing current market activity as being stable or positive, most agents believe activity will rise in the near term.
Many of these agents operate in KZN (66%); EC (62%); GP (55%); and in the price segments up to R2.6 million.
The salient factors driving these expectations include interest rate reductions, positive consumer sentiment, and conducive seasonality.
That said, Mano says stock issues prevail and the structural weakness in the construction sector, as reflected in the long-term trend in residential building plans passed and the 1Q26 FNB/BER Building Confidence Index, should continue to uphold price strength.
They said adding to stock limitations is a slower emigration trend. In addition, there are signs that the earlier trend of semi-migration to coastal areas has likely peaked, as affordability is a growing incentive to living on the coast, particularly in the Western Cape.
“Affordability remains top-of-mind even when deciding to sell (21% of decisions to sell), and most of these sellers are looking to buy cheaper property, making areas that offer value for money more attractive.
"This could explain renewed interest in Gauteng. Households are also downscaling with life stage (24%) while a decent proportion of sellers are looking to upgrade (15%)-highlighting that the factors supporting the market are diverse and this creates the foundation for a balanced recovery.”
The housing market outlook is positive as supply and demand point to enduring market strength, says the senior economist.
They said while structurally constrained supply initially stoked price appreciation, demand should play a larger role as financial conditions ease and sentiment towards SA improves.
“Ultimately, continued political fracturing across the globe will sustain economic policy uncertainty. These developments are often coupled with heightened risk aversion, which does not bode well for financial conditions.
"The war in the Middle East could dampen the willingness to invest in property or compress financial conditions enough to deter buyers who rely on continued improvements in disposable income. This will weigh on how quickly the recovery in the residential property market gathers momentum,” Mano says.
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