It is not possible to predict events in the Middle East, or how they may disrupt fuel supply to the globe, but they do bring upside risk to the South African inflation rate via potential upward pressure on fuel prices.
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The recent events in the Middle East, or how they may disrupt fuel supply to the globe can have implications for interest rates, due to the South African Reserve Bank's (SARB) inflation targeting policy.
And that is not to mention the potentially negative impact on global/local economic and household income growth, says John Loos, now an independent economist.
He says this implies a certain degree of “downside” risk to their forecast for the highly credit-dependent residential property market.
“However, to date, the surge in oil prices has not been severe. The $150/barrel spike in 2008 was an example of a shock that could be called “severe” for the housing market at the time, and the hope must be that this time around it remains far more mild and short-lived.”
The independent economist with over two decades industry experience says South Africa started the year with CPI (consumer price index) inflation very much “under control” at a 3.5% rate in January.
He says this has led him to expect that the SARB could mildly further reduce interest rates, and penciled in two further 25 basis point repo rate cuts, one in the second-half of 2026 and the other early in 2027.
Impact of last years interest rates cuts have not yet filtered through.
In addition, Loos says it is believed that the full impact of last year's series of interest rate reductions has yet to feed through fully into the economy’s performance.
He says this, along with a reasonable global economic growth outlook for 2026, contributes to the expectation of mildly stronger economic growth of 1.6% this year, up from an estimated 1.4% 2025.
According to Loos, the latest Middle East flare-up does pose a significant risk to these forecasts.
“However, a key risk to the 2026 forecast, that has emerged strongly in recent days, has got to be global oil prices, given a particularly volatile situation in the Middle East at present. In the buildup to the US and Israeli attacks on Iran, he says they did see the crude oil prices rising.
“On the January 7, Brent crude touched below $60.00 a barrel. By time of writing this note, it had moved to above $77/barrel. A significant portion of this rise had to do with the initial US military buildup in the Middle East, and more recently the start of the actual conflict.
It is not possible to predict events in the Middle East, or how they may disrupt fuel supply to the globe, but they do bring upside risk to the South African inflation rate via potential upward pressure on fuel prices.
The mortgage lending market appears stable, says Loos. He adds that mortgage originator Ooba’s data points to high mortgage lender loan approval rates and competitive pricing, new loans having been priced at an average of around -0.65 of a percentage point below prime rate early in 2026.
New residential building activity showing some renewed signs of life off a very weak base, he says.
“Recently, off a very low base, StatsSA building stats have pointed to some growth strengthening in residential building planning and completions.”
“I estimate that the StatsSA House Price Index (with 3 months’ worth of data still outstanding) likely averaged growth of around 5.4% in 2025.
“2026 is expected to represent the peak in the short-term cycle, in terms of the pace of average house price growth, with average house price growth this year expected at 6.0% before slowing to 4.1% in 2027.
The reasoning behind expecting 2026 to be the peak, with slowdown in price growth as 2027 approaches, is due to an expected slowdown in the pace of Reserve Bank interest rate cutting, Loos says.
“After having cut the repo rate by 25 basis points four times last year, only one such cut is expected in the 2nd half of this year, and possibly one final 25 basis point cut in the current cycle early next year. Should this interest rate expectation prove true, it would mean a diminishing credit demand growth stimulus in 2026 and 2027.”
Typically, the demand-side response to interest rate movements is swift, the independent economist says. He adds that and indeed, growth in the value of new residential mortgage loans approved grew quite solidly in 2025, reaching 18.2% year-on-year in the third quarter (the most recent SARB data available), on the back of the interest rate cuts.
However, he says given the sensitivity of residential mortgage demand to interest rate moves, a slowing pace of interest rate cutting is likely to lead to this growth rate in new mortgage lending tapering too, as 2026 progresses.
With a lag, he says it is expected that the house price growth rate will then slow towards 2027.
“A slower 4.1% average house price growth rate in 2027 would be nearer to expected CPI inflation, which is expected to hover in the 3-4% range. This would reflect a settling in the market at a new demand-supply equilibrium level, after a period where demand has been exceeding supply of homes on the market,” says Loos.
The weekend’s escalation in US-Iran-Israel tensions resulted in a full-scale military conflict in the Middle East, spilling into bordering countries such as Qatar, United Arab Emirates and Oman, says Bianca Botes, director at Citadel Global.
She says the killing of the Iranian supreme leader, Ayatollah Ali Khamenei, further motivated retaliatory action by Iran. “Fears are that the conflict will escalate into a full-scale war.”
“Brent crude is up nearly 6% this morning as the conflict heightens supply concerns, to trade at $77/barrel. Gold is stronger by 1.6% fuelled by the risk-off sentiment and flight to safety. The US Dollar Index is also in the green this morning,” she says.
According to Botes, the rand, while seeing some losses, remains within its recent range, regaining some ground after trading at R16.13/$ earlier.
“It starts the day at R16.03/$, R18.90/€ and R21.56/£. Volatility is likely to persist as the conflict unfolds.”
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