For construction sites that heavily depend on diesel for daily operations, rising costs may place greater pressure on already tight project budgets.
Image: Waldo Swiegers
Construction costs continue to rise faster than inflation in South Africa.
According to BetterBond’s analysis, between the first quarter of 2025 and the first quarter of 2026, construction input costs increased by 4.3%, while average house prices rose by 6.9%.
“Although the gap between replacement costs and house prices has narrowed, construction costs remain relatively high, which may continue supporting demand for existing homes rather than new builds,” says Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond.
South Africa's infrastructure delivery momentum risks stalling as further diesel price hikes loom, largely driven by ongoing geopolitical tensions linked to the US-Iran conflict and the likelihood that the recent temporary R3 reduction in the general fuel levy will need to be reversed in the months ahead, says Roelof van den Berg, CEO of Gap Infrastructure Corporation (GIC).
He says for construction sites that heavily depend on diesel for daily operations, rising costs may place greater pressure on already tight project budgets.
“For the infrastructure sector, a diesel price movement of this scale can impact every aspect of project delivery, affecting both large, established contractors and small and medium-sized enterprises (SMEs) still gaining a foothold in the industry.”
The infrastructure development services and solutions provider says if the sector fails to adapt before the pressure reaches construction sites, many operators may be forced to shut down temporarily, others permanently, and projects could grind to a halt.
It adds that the public infrastructure sector will feel the strain most sharply, where delays in delivering essential services place entire communities at risk. “When there is a fuel price spike, so do operating and material expenses as pressure moves through the supply chain.”
Recent global market shifts and geopolitical disruptions have once again exposed how quickly stable pricing can unravel under pressure. The best defence is taking the first step: tightening internal operational controls and putting the structures needed in place that allow projects to adjust quickly when conditions materially change, says GIC.
Furthermore, with banks tightening their deposit requirements in April and the rate-cutting cycle on hold, the buyers’ market is expected to continue for the next few months.
Fueled by rising house prices, surging first-time buyer activity, and improving home loan approvals, the housing market has managed to stay the course amid economic headwinds, says Potgieter. “While affordability pressures and stricter lending conditions remain concerns, there are signs of a residential property market.”
South Africa’s housing market is showing renewed strength, defying persistent economic pressure and global uncertainty. Despite higher fuel costs and cautious lending conditions, BetterBond’s latest Property Brief points to a property sector that is not only holding steady but gradually regaining momentum.
The CEO says the latest Property Brief reflects “a housing market staying the course” in the face of challenging conditions.
“We are seeing improvement in loan volumes, application activity and the average size of approved bonds,” he says. “Most encouraging is that homebuyer incomes have increased faster than inflation over the past year.”
“In April alone, application volumes increased by 6.2% despite the seasonal dip caused by school holidays and long weekends. This shows that the lower interest rate is still having an impact on bond activity.”
Since the rate-cutting cycle started near the end of 2023, the BetterBond Index of Home Loan Applications has improved by 12.3%.
BetterBond’s May Property Brief reports the strongest year-on-year house price growth since the post-pandemic recovery of 2020.
Average home prices for first-time buyers increased by 10.3% year-on-year, while repeat buyers recorded even stronger growth of 19.9%. Quarter-on-quarter house price growth has also outperformed the consumer price index by a considerable margin.
“After years of declining average house prices, adjusted for inflation, house price growth is once again on an upward trajectory,” says Potgieter.
Much of this recovery is being driven by first-time buyers, who continue to play an increasingly important role in the market, notes Potgieter.
“BetterBond’s data shows that their share of approved applications has increased from 35.3% in 2024 to 37.65%.” These buyers are also securing larger bonds, with the average value increasing by 5.41% to R1.17 million.
“This suggests that new buyers can afford higher-value properties.”
Despite improving market conditions, the Property Brief highlights a significant shift in lending behaviour. Although deposit requirements have dropped in recent months, BetterBond’s April data reveals a surprising 33% quarter-on-quarter increase for all buyers.
“While the banks’ cautious lending approach was not unexpected, given fears of inflationary pressures, this shift could affect buyer activity,” adds Potgieter.
The increase has been more pronounced for first-time buyers, who must now pay, on average, the equivalent of 38% of their home’s purchase price as a deposit. The average deposit requirement for these buyers has jumped back to levels last seen in 2024.
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