Economists and estate agents are “cautiously optimistic” regarding the outlook for the property sector which started showing signs of improvement in late 2024 as interest rates bottomed out and the South African Reserve Bank dropped the repo rate by a cumulative 50 basis points to 7.75%.
However, they have cautioned that the rising cost of living, including soaring energy and transport costs, coupled with crumbling infrastructure and poor municipal service delivery in some regions, could hamper buyers’ appetites and ability to invest.
Property economist and associate professor at the University of Cape Town Francois Viruly, said [the country’s residential property market is “very sensitive to interest rates, economic growth and the state of our municipalities”.
“The downward trend in interest rates and improved economic growth prospects bode well for the sector, while the state of municipalities remains a significant risk for property owners.
“At present, the Western Cape is largely driving the rise in residential values. In 2025, this performance could broaden to Gauteng and KwaZulu-Natal, which have experienced little to any capital growth in 2024,” said Viruly.
He said declines in inflation and interest rates have underpinned demand in the post-Covid-19 era.
“Added to this there has been an oversupply of new houses in the middle segments of the market that buyers have benefitted from. To a large degree, the impact of the Covid years is now out of the system and the market now relies on investor confidence, the strength of household balance sheets and the macro-economic environment,” Viruly said.
“The next 12 months will see the continuation of the upward phase of the property cycle that was initiated in late 2023. The performance will, however, remain patchy, varying between market segments and locality.
“Affordability in the lower segments of the sector of the market is declining, affecting the ability of households to enter the first rungs of the property ladder.”
Factors affecting affordability include pressure to cover day-to-day necessities, rising transport costs, increasing building costs and a shortage of reasonably located homes.
“Solutions must be found in making the lower end of the property market function more efficiently, increasing supply through small-scale developers and ensuring that housing is delivered closer to places of work,” Viruly said.