Global tensions cloud outlook, but property stays resilient

• Iran conflict and higher oil prices are beginning to slow South Africa's economic momentum and housing demand.
• John Loos expects weaker property growth in the second half of 2026 amid rising interest rates.
• A de-escalation in global tensions could stabilise inflation and support a stronger outlook in 2027.

Global conflict begins to filter through to South Africa

‍South Africa's economy and residential property market are likely to experience a period of slower growth in the second half of 2026 as the impact of the Iran conflict, higher oil prices and rising interest rates begins to work its way through the system.

That is according to independent economist John Loos, whose latest analysis of the South African Reserve Bank's Composite Leading Business Cycle Indicator suggests that economic momentum has weakened after a promising start to the year.

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"The April leading indicator drop does start to suggest that South Africa will likely be required to experience a short period of economic growth slowdown after a promising start to 2026," says Loos.

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The SARB's Leading Business Cycle Indicator declined by 1.78% month-on-month in April, the sharpest fall since March 2023, while year-on-year growth slowed from 5.8% in March to 4.1%.

Geopolitics, oil prices and interest rates

‍According to Loos, much of the deterioration can be linked directly or indirectly to the conflict involving Iran and the resulting spike in energy prices.

By April, South Africans had already experienced the first wave of fuel price increases. Higher oil prices raised inflation concerns and increased the risk of further interest-rate hikes. Since then, the South African Reserve Bank has indeed resumed tightening monetary policy, raising rates at its May Monetary Policy Committee meeting.

Although some of the indicators showing weakness are domestic, including lower business confidence, softer vehicle sales and weaker residential building plans, Loos believes global events have played a significant role in shaping sentiment.

Property market to lose some momentum

‍The highly cyclical residential property market is expected to feel the effects of slower economic growth and higher borrowing costs.

Loos believes housing demand, which tends to lead broader economic activity, is likely to weaken in the months ahead.

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"I am of the belief that we will see slowing credit-driven residential demand in the near term, which will be followed by slowing average house price growth going into the second half of 2026," he says.

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He also expects consumers to pull back spending on durable and semi-durable goods as affordability pressures increase.

A short-lived slowdown?

‍Despite the near-term headwinds, Loos remains cautiously optimistic that the slowdown could prove temporary.

Encouraging signs emerging from US-Iran peace negotiations have already helped push Brent crude oil prices down to around US$77 per barrel from close to US$100 a month earlier. A sustained de-escalation would help ease inflationary pressures and reduce the need for aggressive interest-rate increases.

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"Should this improved situation hold, the near term promises a reversal in the inflation surge domestically, and I expect that after one more 25 basis point interest-rate hike in July, the SARB may well be able to hold rates steady," says Loos.

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While he expects GDP growth to slow to around 1.0% in 2026, compared with 1.1% in 2025, he sees conditions improving again in 2027.

Property investors should keep their long-term perspective

‍For property investors and homeowners, the message is not one of panic, but rather one of patience.

The global environment has become more uncertain and the South African economy is likely to experience a temporary slowdown. Yet underlying property fundamentals remain intact, and any moderation in house price growth should be viewed within the context of a cyclical pause rather than a structural decline.

As geopolitical tensions ease and inflation pressures subside, the foundations remain in place for renewed economic and property market momentum.

In the meantime, investors would do well to focus on long-term value, sound fundamentals and quality assets rather than short-term volatility.

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