Tenants and homeowners grapple with increasing costs of electricity, water and municipal services

For both tenants and homeowners, elevated administered prices, particularly electricity, water and municipal charges, continue to place pressure on household budgets. 

This was even as headline inflation has eased, says Siphamandla Mkhwanazi, a senior economist at FNB. 

“Maintenance costs have also remained high due to the above-mentioned inflation increases in materials and service costs.

"In response, households have adjusted through a combination of cost‑containment strategies, including downsizing, deferring non‑essential maintenance, increased sharing of accommodation, and heightened price sensitivity when selecting rental or purchase options,” Mkhwanazi says.

Commenting on the consumer inflation (CPI) data for January 2026, the Nedbank Economics unit says headline consumer inflation fell slightly from 3.6% in December to 3.5% in January.

The downward pressure emanated primarily from lower transport costs. During the month, fuel prices dropped sharply by 3.4%, benefiting from lower global oil prices and a firmer rand, it says. 

In the other major categories, prices were stable, with inflation for housing and utilities easing from 4.9% to 4.8% as actual rentals for housing and owners' equivalent rent held steady. “Electricity and other fuels slowed from 7.9% year-on-year to 7.5%, while water and other services prices were unchanged.”

The unit says core inflation, excluding food and fuel, continued its gradual climb, rising from 3.3% in December to 3.4% in January. Nonetheless, it remains relatively contained by subdued demand and lower import prices, it adds.

The housing market activity indicators have begun to respond to the improving macro and affordability backdrop, says Mkhwanazi.

He says the estate agent sentiment strengthened materially late in 2025 (75% in 4Q25), signalling improved selling conditions, increased buyer enquiries, and reduced selling times. In line with historical patterns, he says activity is expected to recover ahead of prices, with transaction volumes likely to lead the cycle during 2026.

The economist says as demand strengthens, the first ’response’ may be higher utilisation of existing stock and faster absorption (shorter selling times in some segments), with new building lagging.

He says new residential construction activity continues to operate well below long‑term norms, constrained by weak developer confidence, elevated building costs, and limited appetite for speculative development.

“Cyclically, some improvement in housing completions was recorded in the latter part of 2025, largely driven by increased apartment supply, possibly reflecting the waning demand for larger work‑from‑home spaces, as well as by entry‑level (“small”) standalone housing, likely reflecting sustained demand for more affordable units.

"Nevertheless, overall construction conditions remain subdued.” 

According to the February 2026 BetterBond Property Brief, expenditure on alterations and additions to dwelling houses continued to represent a significant portion of the value of building plans passed by the metros and larger municipalities, with an average monthly value of R1.7 billion during the first 11 months of 2025, marginally higher than the previous year.

Compared to the period before 2023, building plans for alterations to houses took a turn for the worse, both in absolute terms and relative to total residential building plans passed.

“During 2025, the Western Cape consolidated its number one position for this indicator, also in terms of the YOY rate of increase. The Eastern Cape recorded the second highest increase for the YOY growth rate in the value of plans passed for alterations and additions, namely 15.2%.”

Overall, the housing market outlook for 2026 points to the early stages of a durable and balanced recovery, says Mkhwanazi.

“Anchored inflation, easing but disciplined monetary policy, improving real incomes, and structurally constrained supply create an environment conducive to steady growth in activity and moderate house price inflation.” 

While unemployment remains high, incremental improvements should support household confidence and payment capacity at the margin, the bank says. 

“In our outlook, we anchor 2026 housing market outcomes on improving affordability (lower inflation + and easing rates) and recovering real incomes, rather than unemployment alone.” 

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