As South Africa heads towards the 2026 national budget cycle, the focus often turns to ambitious development targets, policy reforms and infrastructure pledges. Yet confidence is slowly being earned in the residential property market.
Source:Supplied. Rainier Van Loggerenberg, Chief Executive Officer of Craft Homes.
After a challenging decade for most homeowners – fueled by rising interest rates, declining property values and strained household finances – buyers have become cautious and savvy.
From a developer's perspective, 2026 is less about a dramatic rebound and more about a stable forecast. Although the recovery remains fragile, subtle signs of stability are emerging, offering a foundation of disciplined investment, measured growth and renewed optimism in the country's housing sector.
latest absa homeowner sentiment index (Q4 2025) reflects this sentiment well: overall consumer confidence in the property market reached 87%, the joint highest level on record, with property still viewed as a safe, value-creating asset that builds long-term wealth and stability.
what has changed
Over the past 18 months, the economic environment has begun to stabilize in ways that matter for housing. Interest rates have come down meaningfully from their peaks (after the cut in 2025, the repo rate remains at 6.75% and the prime at 10.25% in early 2026). Inflation expectations are falling. Credit conditions, although still tight, are no longer worsening. The direction of domestic policy, although slow, is less erratic than in years past.
This is not a bullish cycle. But this is the first time in a long time that the fundamentals are pointing in the same direction.
Affordability for buyers is starting to improve. Lower borrowing costs directly translate into higher approval hurdles and better monthly cash-flow results. Also, real wage growth, although modest, is no longer consistently negative. For many families, this combination is the difference between continued postponement and cautious re-entry into the market.
Coastal boom: Eastern Cape property market outpaces inland growth
ABSA data reflects this: 66% of respondents view the current market as a buyer's market, assets are viewed as fairly valued, and buying sentiment is strong at 77% (up quarter-on-quarter). Young South Africans under the age of 44 are particularly optimistic (89% confidence) and fueled half of recent purchases, while inland areas have shown significantly more enthusiasm than coastal areas across most measures.
We are seeing this reflected in buyer behavior. Demand is improving, but it is disciplined. Buyers are doing their homework. Security, reliable infrastructure, space and long-term operating costs now outweigh speculation. Buyers are looking for certainty and value; Preferences that align with the report's emphasis on ownership rather than renting for financial and lifestyle benefits.
Implications for developers
In this market, success depends on choosing the right nodes, designing for real end-users, and delivering homes that work within today's financial realities. Smaller, more efficient units. Mixed-use complexes that reduce transportation costs.
Developments located close to employment hubs, lifestyle amenities and public infrastructure. These are responses to how South Africans are now living and spending, with trends such as co-living (36% of homeowners share with family to cut costs) and a focus on practical, flexible amenities.
At Craft Homes, we are also seeing a return to long-term thinking from investors. Rental demand remains strong in well-located urban areas, particularly where developments offer security, energy resilience and professional management. Investors are not expecting huge capital gains in the short term, but they are comfortable with stable yields in a stable environment, as reflected in the ABSA HSI's investment sentiment at almost a record 85%.
The R11.5m sale that signals Cape Town's luxury property boom
This is where national policy conversations become relevant. Ahead of the Budget, the housing sector needs execution: fast plan approvals, predictable zoning decisions, reliable bulk infrastructure and functional municipal services. They are practical supporters of private investment.
Residential development is one of the fastest ways to convert policy certainty into economic activity, creating construction jobs, professional services, supply chains and long-term community development. But when approvals stall, when service connections are uncertain, or when regulatory processes are opaque, projects stall.
Capital is waiting. buyers hesitate
Encouragingly, there are signs that cooperation between the public and private sectors is gradually improving. Where municipalities act quickly, coordinate infrastructure planning and provide clear timelines, growth happens. The lesson is simple: predictability unlocks capital.
Another notable change is in seller behavior. Although some sales are still motivated by financial pressure or relocation, an increasing portion of transactions are lifestyle motivated. Downscaling, simplifying and relocating closer to work or family are becoming key themes. This reinforces the importance of offering diverse housing types rather than one-size-fits-all solutions.
Importantly, improved perception does not mean that the risk has disappeared. Credit stress remains high, municipal performance is uneven, and affordability barriers are still real for many households. Recovery, such as it is, is fragile. That is why reckless optimism would be wrong. But even pessimism is no longer accurate.
Why is 2026 the best year for first-time home buyers in South Africa?
South Africa's housing market is beginning to reflect an economy that is slowly repairing itself. Not dramatically. Not evenly. But measurable. For the first time in years, buyers, sellers, lenders and developers are operating within a framework that feels less volatile and more navigable.
As we look to the year ahead, the opportunity is to protect and expand this fragile stability. If the government picks up speed on rapid delivery, approvals, infrastructure and services, the private sector and people can invest, build, innovate and move ahead just like in the last decade.
With strong underlying resilience and already disciplined demand, housing will accelerate as a cornerstone of household wealth and urban regeneration. Let's move forward properly, together.