South Africa’s residential property market is showing growing signs of stabilisation and recovery as easing inflation and lower interest rates begin to filter through to household finances and lending behaviour. Recent data suggests that 2026 could mark a shift from tentative recovery to more sustained momentum in housing activity across multiple regions.
Key Takeaways
- Lower Inflation Is Lifting Demand: Easing inflation and interest rates are improving affordability, driving higher home loan activity.
- Recovery Is Becoming More Widespread: Housing market gains are no longer limited to coastal regions, with stronger activity across several inland areas.
- Buyers Are Returning To The Market: Rising first-time buyer participation and steady investor demand point to a more sustainable recovery in 2026.
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Economic Conditions Begin To Support Housing Demand
South Africa’s cooling consumer inflation environment and the gradual decline in borrowing costs have started to translate into improved home loan activity. This is evident from the newly released Quarter 4 2025 statistics published by ooba Home Loans, which highlight a clear improvement in both demand and lending conditions.
Historically, early signals of renewed home loan demand often emerge while interest rates are still relatively elevated, provided the inflation outlook has improved and households feel more confident about future affordability. During 2025, this historical pattern became increasingly visible.
Annual Consumer Price Inflation eased meaningfully over the year, averaging 3.2%, compared to 4.4% in 2024. This represented the lowest annual inflation outcome since 2004 and marked a notable shift in South Africa’s cost-of-living trajectory.
Lower inflation tends to improve real disposable income, even when salaries grow slowly, because essential expenses such as food and fuel consume a smaller share of household budgets.
This moderation in inflation helped lift consumer confidence by reinforcing expectations that interest rates would be cut in a timely manner. At the same time, reduced price pressures offered tangible relief to household budgets, allowing some prospective buyers to revisit the possibility of entering the housing market.
Supportive Macroeconomic Backdrop Takes Shape
The improved inflation outlook was reinforced by a combination of favourable macroeconomic factors, including a firmer rand, softer global oil prices and a more stable outlook for staple food costs. These developments were reflected in the Household Affordability Index, which continued to show gradual improvement during the year.
Together, these conditions created scope for further monetary easing, with the environment pointing towards the possibility of an additional 25 basis point interest rate cut during the first quarter of 2026.
For homebuyers, even a 25 basis point rate cut can materially improve monthly affordability over a 20 or 25-year bond, particularly for higher-value properties.
Upturn In Home Loan Demand Becomes Clearer
The improving economic environment is already being reflected in measurable home loan market activity. According to ooba Home Loans data, the volume of granted home loans increased by 9% year on year in 2025, signalling a long-awaited recovery following the disruptions of the pandemic period.
More significantly, the total value of granted home loans rose by 17% year on year. This faster growth in value relative to volumes indicates that market activity is increasingly concentrated in higher price brackets and higher loan-to-value transactions, including 100% bonds.
As a result, while the overall recovery in home loan volumes remained modest, the total rand value of housing transactions accelerated as buyers shifted towards more expensive properties and access to finance became easier.
Six consecutive reductions in the prime lending rate, with the prospect of further cuts ahead, helped boost confidence among both lenders and prospective homeowners, reinforcing the recovery trend.
House Price Growth Continues To Outpace Inflation
Throughout 2025, house price growth remained ahead of consumer inflation at a national level. Data from ooba Home Loans shows that the national average purchase price increased by 3.6% over the year, marginally exceeding the average CPI reading of 3.2%.
This meant that residential property delivered positive real price growth, albeit modest, during the year.
Looking ahead, continued improvement in household finances and sustained competition among banks are expected to support further real, inflation-adjusted house price growth during 2026. However, regional performance is likely to remain uneven, as it did in 2025, reflecting the influence of local economic and demographic factors.
Regional Price Performance Shows Divergence
Despite the overall positive trend, not all regions experienced rising prices. Limpopo and Gauteng South and East were the only areas where average prices declined compared to year-earlier levels.
In Gauteng South and East, the average purchase price fell to R1.21 million, slipping below 2024 levels. In contrast, several regions that had struggled in recent years showed improved performance, particularly across Gauteng, Tshwane and KwaZulu-Natal.
This broader recovery suggests that housing market momentum is no longer concentrated in a single province.
Coastal Regions Benefit From Strong Lending Conditions
Lending data indicates that buyers in coastal regions continue to inspire higher levels of confidence among banks. During the fourth quarter of 2025, the national trailing effective home loan approval rate remained elevated at 83.8%.
Approval rates by region in 2025 were as follows:
| Region | Approval Rate |
|---|---|
| Western Cape | 88.3% |
| KwaZulu-Natal | 84.4% |
| Eastern Cape | 84.3% |
The Eastern Cape recorded the largest year-on-year improvement, with approval rates rising by three percentage points.
These trends were mirrored in lending terms. The Western Cape secured the most favourable average interest rate concessions, at 0.90% below prime, followed by the Eastern Cape at 0.78% below prime. Nationally, ooba Home Loans customers received an average weighted rate concession of 0.67% below prime during Q4 2025.
Buyers with strong credit profiles can often negotiate better-than-advertised rates, particularly in competitive lending environments.
The steady improvement in bank concessions since the onset of the pandemic in 2020 highlights the increasingly competitive nature of the home loan market.
Smaller Deposits Continue To Trend Lower
While larger deposits remain preferable from a long-term affordability perspective, they are no longer a strict requirement for successful home loan approval. More than half of ooba Home Loans customers qualified for 100% bonds during 2025.
Average deposits, measured as a percentage of purchase price, declined steadily over the past year, falling from 15.6% in Q4 2024 to 12.8% in Q4 2025.
Deposit trends varied significantly by region:
- Mpumalanga recorded the lowest average deposit at 8.4% of the purchase price
- Western Cape recorded the highest average deposit at 18.9%
The higher deposit levels in the Western Cape reflect a lower proportion of first-time buyers and a generally older, more affluent buyer profile.
First-Time Buyer Activity Rebounds After Slump
Property prices continued to play a decisive role in shaping first-time buyer demand across regions. In the Free State, one of South Africa’s most affordable housing markets, first-time buyers accounted for 61% of ooba Home Loans applications in 2025, with an average purchase price of R920,000.
By contrast, the Western Cape recorded a much lower share of first-time buyers at 36.3%, reflecting significantly higher entry-level prices. In the province, first-time buyers paid an average of R1.7 million, exceeding the national average purchase price of R1.68 million.
At a national level, 2025 marked the first year since 2020 in which growth in the average purchase price paid by first-time buyers, at 4.4%, outpaced overall national price growth of 3.6%.
In addition, first-time buyer applications rebounded strongly, accounting for 46.7% of all home loan applications submitted during the year.
A recovery in first-time buyer participation is often viewed as one of the strongest indicators of a healthy and sustainable property market.
With further interest rate cuts anticipated, supportive lending conditions and improving affordability, first-time buyer activity is expected to strengthen further in 2026.
Investment Buyers Show Preference For Sectional Title
Despite stronger house price growth for freestanding homes compared to sectional title properties during the first eleven months of 2025, investment buyers continued to favour sectional title properties.
Lightstone data showed that freestanding homes recorded price growth of 4.0% over the period, compared to 2.7% for sectional title units. Nevertheless, ooba Home Loans data indicates that 66% of individual buy-to-let investors applying for home loans in 2025 opted for sectional title properties.
Demand for sectional title ownership has risen steadily over the past five years:
- Individual investor applications increased by 10.7% since 2020
- Joint investor applications increased by 8.4% over the same period
A similar pattern emerged among non-investment buyers, with 43% of individual applicants in 2025 choosing sectional title properties. Joint applicants were less inclined, with only 26% showing a preference for this property type.
Foundations For A Broader Housing Rebound
With inflation remaining subdued, lending conditions continuing to improve and both first-time buyers and investors returning to the market, the foundations for a broad-based housing recovery appear firmly established.
If 2025 represented the turning point for South Africa’s residential property market, the outlook suggests that 2026 may be the year in which recovery evolves into sustained momentum across a wider range of regions and buyer segments.
Conclusion
South Africa’s housing market appears to be entering a more confident phase as easing inflation, improving affordability and competitive lending conditions create a supportive environment for buyers. The return of first-time buyers, stronger investor interest and a recovery that is spreading beyond traditional hotspots suggest that the market’s foundations are becoming more balanced and resilient. While regional differences will persist, the combination of lower interest rates, stabilising household finances and renewed confidence positions 2026 as a potential year of genuine momentum rather than mere recovery for the local property market.
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