Andrew König
Redefine Properties
Chief Executive Officer
For much of the past decade, the South African property sector has operated in an uncertain landscape. Challenges have surfaced in succession, from geopolitical disruptions and domestic policy shifts to energy and logistics bottlenecks. Yet recent developments suggest a turning point, with signals pointing to greater stability for long-term investment, including real estate.
Lower inflation targeting, South Africa’s anticipated exit from the Financial Action Task Force (FATF) greylist and the prospect of a sovereign credit ratings uplift each carry different implications, but together they mark a shift in sentiment and suggest stability may be returning to the operating environment.
Reading the signals of stability
Stability in the property sector depends on more than occupancy rates or yields. It is influenced by the broader conditions in which investors, lenders, and tenants make decisions. That is why three macroeconomic indicators are worth noting together.
The Reserve Bank’s renewed initiative towards a lower inflation target indicates a long-term commitment to interest rate stability. South Africa’s expected removal from the FATF greylist addresses a credibility gap that has affected sentiment. The potential upgrade of the country’s credit rating by S&P Global Ratings in 2026 could directly influence the cost of capital. While these signals alone do not resolve South Africa’s structural challenges, together they help restore the predictability that long-term assets, like property, rely on to attract investment with confidence.
Inflation targeting and property values: short-term pressure, long-term stability
One of the clearest signs of stability is the Reserve Bank’s recommendation for a lower inflation target, with discussion focusing on 3%. For property, the effects are subtle. In the short term, lower inflation might slow rental increases more quickly than property prices, especially those of regulated prices. This imbalance could exert some pressure on margins.
Over time, however, the picture changes. A credible lower inflation target stabilises expectations across the economy. Bond yields are likely to decrease, funding costs could reduce, and the risk premium applied to property valuations may contract. For property owners and investors, the main benefit is in decreased volatility, allowing them to plan more securely and commit capital for the long term.
Greylisting and market credibility: rebuilding trust in the system
Alongside monetary policy, governance signals also influence stability. South Africa’s expected removal from the FATF grey list in October 2025 is more than just a milestone for the financial sector. Greylisting has led to increased compliance burdens, slower cross-border transactions, and a higher perceived risk profile. Its removal reinstates credibility, signalling that governance shortcomings are being addressed and making South Africa a more attractive place to do business, thus paving the way for increased foreign direct investment.
For property, the advantage lies in perception and access. International investors are more inclined to consider local assets when governance concerns decrease, and reduced compliance barriers facilitate the free flow of capital. Both effects enhance the operating environment, supporting development pipelines and long-term projects.
Credit rating outlook and the cost of capital: unlocking long-term opportunity. If monetary policy and governance set the stage, sovereign credit ratings influence the terms on which the play unfolds. A potential upgrade from S&P Global Ratings in 2026 would not just be symbolic. It would change the cost of capital across the economy. Property feels that shift more than most sectors because real estate projects are long-lived and capital-intensive; even a small reduction in borrowing costs can determine whether a development goes ahead or is shelved.
An improved rating also broadens the range of international investors able to invest in South Africa, as mandates often limit exposure below certain thresholds. This creates opportunities for new capital inflows and fosters increased competition for high-quality assets. As a result, these effects lead to more viable projects, stronger balance sheets, and ultimately a sector better placed to contribute to economic growth.
Resilience in practice and a cautious optimism
The property sector does not set monetary policy or credit ratings, yet it is among the first to feel their effects. Capital-intensive and reliant on long-term funding, real estate reacts swiftly to changes in interest rates, investor sentiment, and the broader risk profile of the country. What matters is how prepared businesses are to respond when the environment improves. Across the industry, resilience has been built on focusing on fundamentals: maintaining healthy balance sheets, investing in energy efficiency, and adapting portfolios to shifting tenant needs.
For Redefine, resilience means maintaining balance sheet discipline, prioritising capital management, and keeping the portfolio adaptable, ensuring the business is positioned to benefit from a steadier environment.
Signals such as lower inflation targeting, progress on greylisting, and the prospect of a sovereign ratings uplift are not guarantees of growth. However, they are signs that the operating climate is beginning to stabilise. For a sector built on long-term assets, that steadier foundation matters. It allows decisions to be made with greater clarity, partnerships to develop with more conviction, and investments to be considered from a longer-term perspective.
The outlook for South Africa’s property sector is shifting, and these signs offer a stronger foundation for growth that beats inflation. At Redefine, we remain focused on the factors within our control, allowing us to benefit from a more stable environment.