Housing Market to Peak in 2026, But Middle East Conflict Clouds the Outlook

South Africa’s housing market is positioned for a stronger year in 2026, with house price growth expected to peak before moderating in 2027, according to John Loos, a private economist, in his latest Housing Market Outlook released earlier this week.

Loos argues that the domestic backdrop has turned modestly more supportive. Economic growth is forecast to improve from 1.4% in 2025 to 1.6% in 2026, while consumer inflation measured 3.5% in January, close to the South African Reserve Bank’s 3% target. With inflation contained, he believes there is scope for two further 25 basis point interest rate cuts in late 2026 and early 2027, potentially reducing the prime lending rate to 9.75%.

The impact of earlier rate cuts is already visible. Loos estimates that average national house price growth reached 5.4% in 2025, and projects that it will rise to 6.0% in 2026, before easing to 4.1% in 2027 as the pace of monetary easing slows. Growth in the value of new residential mortgage loans granted accelerated to 18.2% year-on-year by the third quarter of 2025, while effective loan approval rates stood at 81.6% for the three months to January 2026.

Financial stress in the mortgage market also appears to have stabilised. The value of mortgage accounts in arrears peaked at 13.1% of the total mortgage book around mid-2024 and had eased slightly to 13.0% by the second quarter of 2025. New residential building activity has begun to recover, although from what Loos describes as a very low base.

However, the central risk to this constructive outlook lies abroad. Brent crude oil rose from below $60 per barrel in early January to above $77 as the conflict between the United States, Israel, and Iran escalated. Loos warns that a sustained oil price surge could lift transport and fuel inflation, undermine South Africa’s low inflation environment, and prompt the Reserve Bank to halt or reverse rate cuts.

For a housing market that remains highly sensitive to credit conditions, that external shock could materially alter the cycle. While 2026 is still expected to be stronger than 2025, Loos cautions that much will depend on whether the current Middle East conflict proves short-lived or develops into a more severe oil shock.