SA Housing market holds firm as new home supply slows

BetterBond’s October Property Brief reveals resilient home loan demand, rising buyer incomes and stronger house prices, but a widening gap between building approvals and completed homes could become the market’s next major challenge.

• Home loan applications rose 2.4% quarter-on-quarter, supported by improved buyer incomes and continued bank lending despite higher interest rates.
• Sectional-title building plans surged 21% year-on-year, but the ratio of completed homes to approved plans declined by 12%.
• Average home prices reached R1.7 million, with supply constraints threatening further price pressure as developers struggle to deliver enough homes.

South Africa’s residential property market is proving more resilient than expected, with home loan applications holding steady, buyer incomes improving and house prices continuing to rise despite renewed pressure from interest rates and household living costs.

However, a potentially more significant challenge is emerging: the country may not be completing enough new homes to meet future demand. According to BetterBond’s October 2026 Property Brief, residential building plans are increasing, particularly for sectional-title developments, but the pace of completed construction is failing to keep up.

This widening gap could place further upward pressure on house prices, even as higher borrowing costs and subdued economic growth constrain affordability.

Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond, believes the market’s underlying resilience is encouraging, but warns that housing supply is becoming an increasingly important concern.

“The concern now is constrained supply, as new homes are being completed more slowly than building plans are being approved.”

Home loan demand remains resilient

Despite the recent shift towards higher interest rates, South African homebuyers are continuing to enter the market.

BetterBond reports a 2.4% quarter-on-quarter increase in home loan application volumes, while average monthly applications during the first nine months of 2026 remained broadly in line with 2025. The figures suggest that the benefits of earlier interest rate reductions are still supporting residential property activity.

Dr Roelof Botha, Economic Advisor to BetterBond Home Loans, says lending conditions have remained relatively favourable, supported by the financial strength of South Africa’s banking sector.

“All provinces, except for North West, have reported improved ratios in the granting of home loans over the past 12 months. This is largely attributable to the banks’ strong financial position and the fact that the increase in homebuyers’ income is happening faster than the recent increase in deposit requirements,” says Botha.

For prospective buyers, this indicates that access to mortgage finance remains available, although affordability and deposit requirements continue to influence purchasing decisions.

Building plans rise, but completions fall behind

One of the most important findings in the October Property Brief is the growing difference between residential developments being approved and those actually reaching completion.

The value of residential building plans passed during the first seven months of 2026 increased by 8.4% year-on-year. Even more notable was the 21% increase in sectional-title building plans, suggesting continued demand for apartments, townhouses and other higher-density residential developments.

“This confirms a more upbeat environment for residential growth,” says Botha. “The market is adapting to changing affordability and buyer preferences.” However, approved plans do not automatically translate into completed housing.

Between January and July 2026, the ratio of completed residential buildings to approved plans in metros and larger municipalities declined by 12% year-on-year. This indicates that residential construction is not keeping pace with the pipeline of planned developments.

“This slowing pace of new residential buildings is likely to continue placing upward pressure on house prices, even as higher interest rates and a subdued economy weigh on demand,” Botha explains. For developers and investors, the figures highlight the importance of converting planning approvals into completed, market-ready homes.

Western Cape and Gauteng lead new housing delivery

Residential construction activity remains concentrated in South Africa’s three largest provincial property markets. During the first seven months of 2026, the Western Cape recorded R6.2 billion in completed houses and flats, narrowly ahead of Gauteng at R6 billion.

Gauteng’s completed residential building value increased by 3.2% year-on-year. Together with KwaZulu-Natal, the two provinces accounted for 88% of the country’s R16.2 billion in completed residential building value over the period. Mpumalanga was the only other province to record year-on-year growth.

The geographic concentration highlights both the strength of established residential markets and the challenge of expanding housing delivery more broadly.

For property developers, it also reinforces the importance of infrastructure availability, market demand, construction feasibility and access to development finance.

House prices are rising faster than inflation

Despite higher interest rates, residential property prices have continued to gain ground. BetterBond reports that average house prices across its buyer base increased by 1.8% in real terms during the third quarter, with the average purchase price reaching approximately R1.7 million.

First-time buyers experienced particularly strong price growth, with average purchase prices increasing by 8.4% year-on-year. Some age groups recorded even stronger gains. Buyers aged 51 to 60 experienced 11.4% real house price growth, taking their average purchase price to approximately R2.2 million.

“The positive impact of the lowering of the prime lending rate after September 2024 can still be seen in the double-digit average nominal house price growth for buyers between the ages of 31 and 40, and those aged 51 to 60,” says Botha.

Potgieter believes the combination of resilient demand and constrained housing delivery is supporting price growth. “House price inflation is being driven by increased demand, with the slow pace of residential project completions contributing to upward pressure on prices,” he says.

While rising prices may benefit existing homeowners, they create additional affordability challenges for prospective buyers attempting to enter the market.

Buyer incomes provide an important buffer

A major factor supporting residential market activity has been the improvement in income among BetterBond’s homebuyer applicants. Average monthly homebuyer income reached R74,000 in the third quarter of 2026, representing an average real annual increase of 4.7% over the past five years.

For first-time buyers, average income increased by 13.4% year-on-year. These improvements have helped offset some of the pressure created by higher interest rates and rising deposit requirements.

However, the R74,000 figure represents the income profile of buyers in BetterBond’s data and should not be interpreted as the average income of South African households.

Deposit requirements have also increased. By the end of the third quarter, the average deposit requirement for all buyers was 21.7% higher than a year earlier. For first-time buyers, the increase was considerably smaller at 5.6% year-on-year.

“This comparatively smaller increase makes building the savings required for a bond deposit a bit more manageable. In this way, banks are helping to enable new buyers to enter the property market despite higher lending rates,” says Potgieter.

Nevertheless, prospective buyers must still balance deposit savings, monthly bond repayments, transfer costs and ongoing ownership expenses against household budgets.

Construction recovery offers hope

Although residential completions remain under pressure, there are signs that South Africa’s broader construction sector is recovering. The Afrimat Construction Index increased by 5% quarter-on-quarter in real terms during the second quarter of 2026, outperforming overall economic growth.

Construction employment also increased by approximately 95,000 jobs over the 12 months to June 2026. These improvements could provide a foundation for stronger residential development activity if sustained.

“If this trend continues, it could translate into expanded residential development which would help close the gap between housing demand and homes completed,” says Potgieter.

However, translating improved construction activity into additional housing will require developers to overcome challenges relating to infrastructure, project feasibility, funding costs and delivery timelines.

Interest rates and fuel costs remain key risks

The outlook for residential property remains sensitive to inflation, interest rates and household affordability. Higher borrowing costs increase monthly bond repayments and can reduce the amount buyers qualify to borrow.

Rising fuel prices add another layer of pressure, particularly for households commuting long distances between residential areas and employment centres.

BetterBond notes that recent inflation pressures have been influenced by supply-side factors, including international fuel market disruptions. If these pressures ease, there could be scope for improved inflation outcomes and potentially lower interest rates.

However, the timing and extent of any future interest rate reductions remain uncertain. For homebuyers, the practical approach is to assess affordability against current borrowing costs rather than rely on anticipated rate cuts.

What this means for property investors and developers

The October Property Brief points to several important implications for South Africa’s residential property market.

• For homebuyers
  Improving incomes and continued bank lending are positive developments, but higher deposits and rising purchase prices make financial preparation essential.
• For property investors
  Slower housing delivery may support prices in supply-constrained locations, but investment returns must still be assessed against financing costs, achievable rentals, vacancies and ongoing expenses.
• For developers
  The increase in sectional-title approvals signals demand for higher-density housing. The opportunity lies in delivering appropriately priced homes efficiently and at scale.
• For the wider market
  Improving construction activity is encouraging, but housing availability will ultimately depend on completed developments rather than approved plans alone.

Outlook: Supply could become the bigger challenge

South Africa’s residential property market enters the final quarter of 2026 with several encouraging fundamentals. Mortgage demand has stabilised, buyer incomes are rising and banks remain willing to extend housing finance.

At the same time, house prices are growing faster than inflation, and the number of completed homes is not keeping pace with the increase in approved building plans. The recovery in construction offers hope, but it will take time for stronger building activity to translate into additional housing stock.

“For now, improved incomes and an appetite for lending are keeping buyers in the market. A cut in the prime lending rate before the end of the year would go a long way to improving affordability and stimulating buyer activity; particularly among first-time buyers, into 2027,” says Potgieter.

He concludes with a warning that captures the market’s emerging challenge: “It may well be that supply, and not buyer demand, will be the housing market’s challenge over the next few months.”

The message for South Africa’s residential property industry is clear: demand remains resilient, but sustaining a healthy and affordable housing market will increasingly depend on turning approved developments into completed homes.

Source: BetterBond October 2026 Property Brief.
Visit www.betterbond.co.za/property-brief for the report.