Housing market recovery in 2026 as inflation eases

South Africa’s easing consumer inflation and resultant lower interest rates have begun to translate into increased home loan activity (Image source: © 123rf 123rf)

This is according to the newly released Quarter 4 2025 (Q4 ’25) statistics from ooba Home Loans.

Historically, early indicators of renewed home loan demand typically emerge while borrowing costs remain relatively high, provided the inflation outlook has improved.

In 2025, this pattern became evident.

Annual Consumer Price Inflation (CPI) eased, averaging 3.2% during the year, down from 4.4% in 2024 and marking the lowest annual rate since 2004.

This moderation not only lifted consumer confidence by strengthening expectations of timely interest rate cuts but also relieved pressure on household budgets, giving some prospective buyers the boost needed to once again consider homeownership.

According to Rhys Dyer, CEO of the ooba Group, these dynamics have created a supportive macroeconomic backdrop.

“Coupled with a stronger rand, softer global oil prices and a favourable outlook on staple food costs, as reflected in the Household Affordability Index, there is clear scope for a 25 basis point cut in Q1 ’26, potentially as soon as end January,” he says.

(Image source: © SA Reserve Bank and ooba Home Loans)

Upturn in demand for home loans

This improving environment is already being reflected in home loan market activity.

Dyer notes that the volume of granted home loans originated by ooba Home Loans rose by 9% year on year in 2025, signalling a long-awaited post-pandemic recovery.

More telling, however, is the 17% year-on-year increase in the value of granted bonds.

“The fact that the value of granted bonds is increasing at a faster rate than the unit growth indicates that market activity is more concentrated in higher price bands and higher loan to value’s (100% bonds).

As a result, even though the recovery in overall home loan activity has been modest, the total value of home loan sales is rising more rapidly as transactions shift toward higher-priced properties and access to home loan finance eases.

Six consecutive cuts in the prime lending rate with potentially more to come, have boosted the confidence of both lenders and homebuyers,” he explains.

National HPI continues to outpace CPI

Throughout 2025, South Africa’s house price growth outpaced consumer inflation, with data from ooba Home Loans revealing that the national average purchase price increased by 3.6% during the year, marginally exceeding 2025’s average CPI of 3.2%.

“As household finances continue to improve and banks maintain attractive lending conditions, we anticipate that national house prices will register improved positive, real (inflation-adjusted) growth in 2026.

“That said, regional housing market performance is likely to diverge, as it did in 2025, reflecting the influence of localised factors.”

Image source: © ooba Home Loans

Limpopo and Gauteng South & East were the only regions where the average price paid declined compared to year-earlier levels, with the average purchase price of R1.21m in Gauteng South & East falling below 2024 levels.

What is great to see is the improved performance across many regions that were struggling for the past few years, especially in Gauteng, Tshwane and KZN.

“The recovery is no longer a Western Cape story but becoming widespread.”

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Coastal regions benefit from attractive lending conditions

While the national trailing effective approval rate remained elevated at 83.8% in Q4 ’25, ooba Home Loan’s data indicates that buyers in coastal regions are inspiring additional confidence among banks.

In 2025, the Western Cape recorded the highest home loan approval rate at 88.3%, followed by KwaZulu-Natal at 84.4% and the Eastern Cape at 84.3%, which also saw the biggest year-on-year improvement, up 3 percentage points.

This trend is mirrored in lending terms, with the Western Cape securing the most favourable rate concessions, at an average of -0.90% below prime, followed by the Eastern Cape at -0.78% below prime.

Image source: © ooba Home Loans

However, Dyer notes that all regional markets saw improved rate concessions last year and that nationally, ooba Home Loans customers received an average weighted rate concession of -0.67% below prime in Q4 ’25.

“The banks’ average concessions to prime have improved steadily each year since the onset of the pandemic in 2020, underscoring the positive role that the competitiveness amongst the banking sector for home loans market share is playing in the current housing market recovery.”

Smaller deposits continue to trend

While Dyer stresses that a larger deposit is always preferable in the interests of ensuring long-term affordability, it is by no means a requirement for a successful home loan application, with more than 50% of ooba Home Loans customers qualifying for a 100% bond (with no deposit).

ooba Home Loans data shows that average deposits, measured as a percentage of purchase price, have declined steadily since 2024 - falling to 12.8% in Q4 ’25 from 15.6% in the same period in 2024.

The decline of deposits in 2025 varied widely by region, from a low of 8.4% of the purchase price in Mpumalanga to a high of 18.9% in the Western Cape – the latter reflecting the lower percentage of first-time buyers, and its older, more affluent buyers.

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Applications from first-time homebuyers rebound after 2024’s slump

Across regional markets, property prices clearly shape first-time buyer demand.

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 just R920,000.

This contrasts sharply with the Western Cape, where first-time buyers made up just 36.3% of applications in 2025, a trend that comes as no surprise considering that the average purchase price paid by first-time buyers in the province (R1.7m) is higher than the national average purchase price of R1.68m.

Image source: © ooba Home Loans

However, at a national level, 2025 marked the first time since 2020 that growth in the average purchase price paid by first-time homebuyers (+4.4%) outpaced overall national price growth (+3.6%).

Further good news comes in the uptick in first-time buyer home loan applications, comprising 46.7% of all applications received by ooba Home Loans in 2025.

Dyer shares that this uptick, after years of lower demand following the record highs of 2020, should be seen as the greatest indicator yet of the property industry’s recovery.

“With further rate cuts on the horizon, supportive lending conditions and improving household affordability, the stage is set for a stronger rebound in first-time buyer activity in 2026.”

Solo investment buyers favour sectional title

While Lightstone data shows that house price growth was greater for freestanding homes than sectional title properties during the first 11 months of 2025, at a rate of +4.0% versus +2.7%, this hasn’t stopped investment buyers from pursuing sectional title properties with enthusiasm.

ooba Home Loans data signals that in 2025, individual buy-to-let investors applying for home loans showed a stronger preference for sectional title properties, with 66% choosing this property type.

That said, appetite for sectional title properties has increased steadily over the past five years, with applications rising by +10.7% for individual investors and by +8.4% for joint investors since 2020.

Home loan applications by non-investment buyers follow a similar trend, with 43% of individual applicants in 2025 opting for sectional title ownership, and only 26% of joint applicants showing a preference for this property type.

Dyer concludes that with inflation remaining subdued, lending conditions steadily improving, and both first-time buyers and investors re-entering the market, the foundations for a broad-based housing rebound are firmly in place.

“If 2025 marked the turning point, 2026 is looking set to be the year the local property market shifts from recovery to real momentum.”