The residential property market is driven by two key factors: affordability and sentiment.
The latest rate hike by the Reserve Bank is likely to test both.
Over the last six months, the residential market has benefited from falling interest rates and improved consumer confidence.
The BER Consumer Confidence Index is clawing its way back to a neutral position, having last been in positive territory in 2019, and interest rates have come off a high of 11.75% in May 2023 to 10.25% before the latest rate increase.
From an affordability point of view, a first-time buyer with a home loan of R1 million is paying R1 000 less than a year ago, with zero transfer duty on purchases below R1.21 million.
The bank lending environment remains positive, with banks fighting for market share and buyers benefiting from competitive rate concessions.
ABSA’s latest House Sentiment Index for Q1 2026, which tracks buyer, seller, and investor sentiment, shows the highest sentiment measure since the report’s inception in 2015, with 90% of those surveyed between the ages of 25 and 34 believing that home ownership is still aspirational.
The result is a residential market growing at 5.7% according to First National Bank’s House Price Index, its best level since the post-Covid period, when rates were at a historic low of 7%.
Even with inflation rising to 4%, property prices are still growing in real terms, if only marginally.
The 0.25% rate increase will add just R168 per million rand of home loan to monthly repayments, but this comes off the back of significant fuel price increases and rising electricity costs that consumers already absorb annually.
Residential property still offers excellent value outside of areas like the Western Cape, and demand continues to exceed supply in the market across sales and rentals, creating a favourable environment for buyers, sellers, and investors alike.
Tenants tend to be more price-sensitive to cost increases and disposable income pressure, which may result in rental prices flattening. Investors would do well to hold onto paying tenants, even at lower escalations.
How long we remain in a high fuel cost, high inflation environment will determine how the market holds up and whether buyers adopt a more cautious approach.
The longer-term outlook for residential property remains positive, but in the short to medium term, the market’s resilience will be tested.
*The writer of this article is Heschel Jawitz, CEO Jawitz Properties. The views expressed by Heschel Jawitz are not necessarily those of The Bulrushes
