The Property Market in South Africa – Trends, Insights, and What to Expect in 2025

Article summary:

• September 2024 saw the first interest rate cut in several years, followed by another cut in November 2024.
• Demand for properties is high due to limited supply.
• Investors should look at diversifying portfolios, as commercial properties currently make for a more lucrative investment than residential properties.

Experts say young people should get on the property ladder as soon as possible. Investing in property and using the income to pay off a bond makes more sense than getting stuck in a rent trap.

So young investors should enter the property market confident that they’re making the best choice for their financial situation.

Of course, it helps to do your research and understand the property market before taking a step.

South African property market useful.

Note Before investing in the property market, it helps to know what you can afford. Get pre-approved with ooba Home Loans to receive a solid estimation.

What you need to know about the property market in South Africa

• Interest rates.
• Supply and demand.
• Popular locations.
• Popular property types.

We recommend employing an estate agent. They are well-positioned to advise you on the ins and outs of the property market, providing insight into factors such as the location and demand.

Interest rates

This is the critical factor affecting the property market, and thankfully things look positive regarding interest rates.

In September 2024, the South African Reserve Bank cut the interest rate by 25 points, reducing it from 11.75% to 11.50%.

This was the first interest rate cut in several years.

Experts predicted more cuts, and sure enough, in November 2024 there was another 25 point cut, making the interest rate 11.25%.

Supply and demand

Prospective Investors will be pleased to know that property demand is high due to a shortage of supply.

South Africa is in the midst of a housing crisis, with an estimated backlog of 2.3 million units.

Demand for investment/buy-to-let properties – which peaked at 12.9% of all ooba mortgage applications in February 2024, stood at 12% of all ooba applications in July 2024.

Increasing competition due to semigration and foreign investment, combined with an undersupply of properties and high property prices, had led to an increase in tenants in areas like the City Bowl, Atlantic Seaboard, and Southern Suburbs.

Increase in first-time buyers

According to ooba Home Loans, national applications for first-time buyers rose to 46.6% in July 2024, rebounding from a subdued 44.3% in June, with demand likely to improve further later this year.

Popular locations

Remote, scenic areas, especially coastal, have experienced an influx of people.

In the wake of the pandemic, as the work-from-home lifestyle has taken hold.

This has led to a higher demand for properties in remote, scenic areas as home buyers seek more comfortable environments to work.

This is a major factor contributing to semigration to coastal areas, making this a prime location for property investment.

Mixed-use developments in urban areas also make for a solid investment, ironically for the same reason mentioned above. Young professionals are also on the lookout for properties that provide a comfortable work-from-home environment; and mixed-use developments, which seek to provide facilities such as gyms, office spaces, and cafes on site, are geared towards this purpose.

Many of these mixed-use developments are situated in bustling city areas so younger buyers/tenants can enjoy the nightlife when they’re not working.

Properties in upmarket areas in Cape Town are always a solid investment, despite the high cost, due to the influx of tourists during the holiday season.

Popular property types

Residential properties are the go-to for buy-to-let investors

However, commercial properties are also a solid investment. They have a capex rate of 11% compared to 5-8% for residential properties.

Commercial properties can be divided into several categories:

• Retail properties.
• Industrial properties.
• Warehouses.
• Office complexes.

Retail properties can provide a particularly lucrative investment. They made up 30% of commercial property transactions in 2023 / 2024.

One of the advantages of retail properties is that tenants are more likely to take care of the property since they are financially invested. Another is that properties are only operational during business hours, so landlords won’t have to worry about emergency phone calls during the night.

Industrial properties are always in high demand due to low availability. They have longer leases and more committed tenants. However, the owner of a property may be held liable for injuries that occur on the property.

IMPORTANT NOTE Banks will only fund up to 75% of a commercial property purchase.

Student accommodation
Aside from commercial properties, student accommodation is also a potentially lucrative property type.

This is due in no small part to the shortage of supply. According to the International Finance Corporation (IFC), there is a shortfall of more than 500 000 beds.

Investors should be looking for properties located near educational facilities, and rent them out at affordable prices.  According to IOL, The estimated cost of financing a student bed is R54 000 a year, but students funded by the National Students Financial Aid Scheme only receive between R31 000 and R35 000 a year for accommodation.

Get the best deal on your bond

Investments are more profitable when you’re paying less on interest rates and bond repayments.

ooba Home Loans can assist by submitting your bond application to multiple banks. This will enable you to compare the deals they offer and choose the most appealing package.

So apply with ooba Home Loans to get the best deal on your bond and make the most of your investment.

Find out what you can afford

The pre-approval process will assess your financial situation, including your credit record, and provide a solid estimation of what you can afford.

You’ll then be able to hunt for property within your price range, confident that you’ll be able to afford it as your application has already been theoretically approved.

You can get pre-approved by contacting an expert at ooba Home Loans or by using our free, online pre-approval tool, the Bond Indicator.