Slow economic growth is trapping the South African property market in a cycle of delayed recovery

Without faster, sustained GDP growth, unemployment will merely decline slowly, thereby capping the pace of the property market recovery.

Unemployment remains a major hurdle

Unemployment is a key constraint that remains in South Africa's economy, says JP Viljoen, the executive for Asset Ownership at Nedbank.

“One important nuance is that the unemployment improvement is encouraging, but it is partly driven by labour force dynamics and higher discouraged work-seekers,” Viljoen says. 

For the property market, Viljoen says what matters most is sustained, quality job creation that lifts real household incomes and confidence. “If we get that alongside a supportive inflation and interest rate environment, the property market recovery becomes both stronger and more inclusive.” 

According to Statistics South Africa’s (Stats SA) Quarterly Labour Force Survey (QLFS) for the last quarter of last year, there was an increase of 44 000 in the number of employed persons to 17.1 million, while there was a decrease of 172 000 in the number of unemployed persons to 7.8 million compared with the Q3: 2025 results.

“This resulted in a decrease of 128 000 (or 0.5%) in the labour force in the same period. The above changes in employment and unemployment resulted in the official unemployment rate (LU1) decreasing by 0.5 of a percentage point from 31.9% in the third quarter of 2025 to 31.4% in the fourth quarter of 2025. 

During the same period, Stats SA said discouraged job-seekers increased by 233 000 to 3.7 million, other available job-seekers decreased by 110 000 to 855 000, and unavailable job-seekers decreased by 41 000 to 42 000, resulting in a total net increase of 82 000 to 4.6 million in the potential labour force population (i.e. persons who were available but not seeking or unavailable but seeking). 

The marginal improvement in the unemployment rate is supportive, but on its own, it is not yet a decisive demand catalyst, says the executive.

“What it does signal is a gradual stabilisation in household income security, which typically shows up first in improved rental demand and improved payment performance, and only thereafter in sustained growth in home buying.

"The quality of the employment improvement also matters. This quarter’s movement was helped by a decline in the labour force and a rise in discouraged work-seekers, which means the headline improvement slightly overstates labour market strength.” 

With that said, Viljoen says the combination of easing inflation, lower debt-service pressure, and improving confidence does support a gradual recovery in both rental and homebuyer activity, particularly in more resilient segments and regions.

Outlook positive

“The outlook is positive, but it is a gradual, uneven recovery rather than a sharp rebound,” the banking unit says. 

It says the property market is entering a gradual recovery phase.

“With inflation moderating and interest rates expected to trend lower over time, affordability should continue to improve, which supports both transaction volumes and price stability.” 

In that environment, they say they expect:

• A steady improvement in home loan activity, led by higher-income and more stable employment segments, first, then broadening if labour conditions improve meaningfully.
• Rental markets are expected to remain competitive on pricing in many areas, but with improving tenant stability as debt-service costs ease and inflation remains contained.
• Continued regional divergence, where provinces and metros with stronger economic nodes and inward migration dynamics outperform.

Household pressure eases, but cost base remains elevated

According to Viljoen, household pressure has eased at the margin as inflation has moderated, but the cost base for both tenants and homeowners remains elevated in key lines, particularly utilities and municipal services, and maintenance-related inputs.

For tenants, this means affordability remains a binding constraint, so rental increases are still more constrained than landlords would prefer, and tenants remain value-focused on total occupancy cost, not just rent. 

For homeowners, lower inflation and a more supportive interest rate trajectory create breathing room, but many households are still prioritising essentials and managing discretionary spend tightly.

Landlords responses

The executive says landlords are responding in three practical ways:

• Keeping escalations realistic to protect occupancy and reduce arrears risk.
• Phasing non-critical maintenance while prioritising safety, compliance and asset preservation.
• Investing selectively in efficiency improvements where there is a clear payback, for example, water and energy resilience solutions, to reduce operating volatility over time.

Asked whether property market players are positive that things are turning around with this decline in unemployment, the executive says they are cautiously positive. 

“The direction of travel is positive. Inflation is well contained, the interest rate outlook is more constructive, and employment in sectors like construction and finance is encouraging for the property ecosystem. These factors support sentiment and activity.” 

However, they pointed out that the optimism remains measured because the labour market is still structurally weak, year-on-year job growth is close to flat, and the rise in discouraged job-seekers is a clear warning signal.

“In short, sentiment is improving, but the recovery is not yet broad-based enough to justify overly bullish expectations.” 

Modest decline in unemployment, not a step-change in property demand

The banker adds that a modest improvement in unemployment does not automatically translate into a step-change in demand that forces new supply. “In the near term, we would expect demand to be absorbed through existing stock first, supported by improved affordability dynamics and better consumer confidence.” 

New building or acquisition decisions will depend on clearer evidence of sustained demand growth, improving household formation, and confidence that operating costs and construction input costs are stabilising, Viljoen says.

“Over time, if the improving macro trend persists and employment gains become more durable, we should see increased investment appetite, particularly in well-located, appropriately priced segments and rental nodes where demand is deepest.” 

Interest rates are said to remain an important consideration for homebuyers this year. Last month, the South African Reserve Bank (SARB) kept the repo rate unchanged, following a series of cuts over the past year that eased borrowing conditions from the peaks seen in 2023 and 2024.

Interest rate environment 

While the interest rate environment has improved, borrowing costs continue to shape buyer confidence, says Adrian Goslett, CEO and regional director of REMAX Southern Africa. 

“Although interest rates have come down from their peak, they are still high enough to influence buyer decision-making, as buyers today are far more cautious. They want certainty that their monthly repayments will remain affordable.”

Despite this caution, Goslett says there are encouraging signs that buyer confidence is gradually returning as conditions stabilise and buyers are becoming more financially prepared.

“We’re slowly starting to see more momentum in the market as interest rates become less of a dominant obstacle than they once were. Buyers who are better positioned financially are beginning to re-engage more actively,” he adds.

According to BetterBond’s Property Brief for February 2026, home loan applications in January were 2.8% higher compared to January 2025 and 10.4% above January 2024 levels, thereby signalling a steady recovery in buyer activity after the traditional year-end slowdown.

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