South Africa’s residential property market continues to show signs of recovery, with home loan applications rising and buyer activity steadily improving.
Lower inflation and declining interest rates have been the main drivers of this trend over the past year, alongside declining deposit requirements and rising real incomes, and home prices have started to show growth again as a result. Average home prices among first-time buyers have risen by 3,6% over the past year and those among repeat buyers by 5,3%.
In nominal terms, the average price paid by all buyers in the first quarter was R1,67m, with the average price paid by first-time buyers rising to a record high of R1,35m.
According to the latest BetterBond Property Brief, home loan applications in the first quarter continued on the recovery path that started in 2024, when the first rate decreases in the current cycle were announced. There was a 9,7% quarter on quarter increase in the number of home loan applications received, and a year-on-year increase of 6,1%.
The market has also been buoyed by a consistent decline in home loan deposit requirements, with the average deposit requirement for first-time buyers, for example, having declined by 26,6% since the first quarter of 2024. Some 40% of home loan approvals now go to first-time buyers – an achievement that has largely been enabled by increased investor confidence in SA’s banking sector, better than expected economic growth and reduced credit impairment ratios thanks to the improving financial position of many households.
Rising incomes have also helped, with employees achieving a big win in 2024 when the average take home pay increase was 7,9% in nominal terms, or a comfortable 3,5% ahead of the annual inflation rate. In 2025, most salaries increase by 5,3% to 5,7%, and many industries are now expecting to maintain a “new normal” of increases that are 1% or 1,5% ahead of inflation.
However, the escalating conflict in the Middle East over the past few weeks has slowed the momentum of the recovery by causing fuel prices to rocket and buyers to take a step back as they wait to see what the effects will be on inflation and interest rates.
BetterBond notes that the current level of geopolitical uncertainty has emerged as a “significant non-economic force influencing asset prices and market behaviour worldwide” – and is likely to slow the transition of the SA real estate sector from a buyers’ market to a sellers’ market unless it ends soon.
It also says, though, that several of the most important local indicators affecting the property market remain conducive to an expansion of activity if the Middle East war ends swiftly. These include reductions in both the Consumer Price Index (CPI) and Producer Price Index (PPI), which played a large part in the Monetary Policy Committee of the Reserve Bank being able to keep interest rates on hold in March instead of raising them in the face of the steep increases in international oil prices.
In February, the annual PPI for final manufactured goods slowed to 1,8%, down from 2,2% in January, while the CPI fell to 3,0%, down from 3.5% in January. The concern is that the CPI could rise to 4% for the year as a whole - and possibly even higher - if the Middle East conflict persists for much longer.
This would limit the Bank’s ability to make the additional rate cuts that were predicted for 2026/ 27 and have a negative effect on affordability. In addition, a protracted conflict could cause a knock-on increase in the cost of construction materials and cause developers to either put projects on hold or raise their prices, which would once again make things more difficult for buyers.
In summary, while global uncertainty may temper short-term momentum, the underlying fundamentals of South Africa’s residential property market remain encouraging. Improved affordability, easing credit conditions and resilient household finances continue to support demand, particularly among first-time buyers. If inflation can be contained and interest rates remain stable or trend downward, the market is well positioned to build on its current recovery path.
In the meantime, though, both buyers and sellers would do well to stay informed and act decisively when opportunities arise, as conditions may shift quickly in response to both local and international developments.
