2026 Property Outlook: Where resilience will beat speculation

• Rental shortages will keep residential escalations firm while commercial remains selective and asset-specific.
• Municipal performance and tenant quality will increasingly determine property values.
• Adaptable, income-secure assets will outperform new developments in a high-cost, high-risk environment.

2026 Property market

‍The South African property market in 2026 will be shaped less by aggressive expansion and more by resilience, adaptability and risk management. With new supply constrained by high construction costs, tightening compliance, and uneven municipal performance, investors will need to think defensively and strategically.

According to Waldo Marcus, Director at TPN Credit Bureau, portfolio value will increasingly depend on income certainty and location functionality rather than pure capital growth assumptions.

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‍“Property performance in 2026 will be driven by tenant quality, municipal service delivery and the ability of assets to adapt to infrastructure failures. Income stability is becoming the real measure of value,” says Marcus.

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Rental Escalations & Market Dynamics

Residential
TPN forecasts residential rental escalations of between 4.5% and 5.5% for 2026, driven primarily by a persistent shortage of rental stock and rising replacement costs.

• Gauteng is expected to continue delivering steady rental growth, supported by inward migration, employment concentration and ongoing commercial-to-residential conversions.
• Western Cape shortages are expected to ease slightly, but affordability will cap escalation momentum, particularly outside the luxury coastal nodes.
• KwaZulu-Natal should see moderate growth, underpinned by secure estate demand and coastal lifestyle migration.
• Eastern Cape rentals are expected to remain largely flat.

Commercial
Office rentals will remain under pressure, with escalations forecast around 3%, but the picture is uneven:

• Industrial, storage and logistics-linked assets remain in demand.
• Convenience retail in well-located neighbourhood centres continues to outperform.
• Single-tenant, large-format office and retail assets carry elevated risk.

Four key forces shaping the 2026 market

1. New supply Is constrained by construction reality
High building costs, skilled labour shortages and contractor failures are suppressing new development. As a result, most new stock will enter the market at rental levels that strain affordability and compress yields.

Adaptive reuse and commercial-to-residential conversions will increasingly replace greenfield development as the preferred growth strategy.

2. Infrastructure Pressure and Reactive Regulation
Government’s infrastructure focus, coupled with fiscal stress, will translate into:

• Higher development contributions and bulk service costs
• More aggressive compliance and regulatory intervention
• Potential pressure on short-term letting, zoning and building approvals

Small interest-rate cuts will help sentiment, but will not trigger a construction boom.

3. Municipal performance will drive capital flows
The 2026 local government elections will sharpen investor focus on service delivery, financial stability and infrastructure maintenance.

Capital will continue to migrate toward municipalities that demonstrate:

• Reliable electricity and water supply
• Efficient planning approvals
• Effective policing and by-law enforcement

Property values will increasingly reflect governance quality, not just location.

4. Tenant risk will define asset valuation

As economic pressure persists, tenant quality becomes central to valuation.
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Marcus warns:
“A property’s true worth lies in the reliability of its income stream. Weak tenants translate directly into weaker asset values.”

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Multi-tenant diversification, rigorous screening and arrears management will be essential, particularly in commercial portfolios.

Investor Strategy for 2026

‍Successful investors will prioritise:

• Existing, adaptable assets over speculative new builds
• Energy, water and security resilience as standard investment criteria
• Strong tenant covenants and diversification to protect income
• Well-governed municipal areas with stable service delivery
• Conservative gearing to preserve liquidity in a volatile operating environment

In commercial property, focus will shift toward:

• Neighbourhood convenience retail
• Last-mile logistics and light industrial
• Mixed-use and multi-tenant formats

Outlook for the year

‍The 2026 property market will reward discipline, not bravado.

High construction costs, uneven municipal performance and rising tenant risk mean the era of easy speculative gains is over. Investors who focus on income durability, asset adaptability and location functionality will protect and grow value.

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As Marcus summarises: “Resilience is the new growth strategy. Properties that can secure reliable tenants, operate independently of failing infrastructure, and sit within functional municipalities will be the real winners in the years ahead.”

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In 2026, smart property investment will be less about chasing the next boom and more about building portfolios that can endure.

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