The South African property market kicked off 2025 with a sense of cautious optimism. Inflation was easing, interest rates were holding steady with a possibility of slight declines, and policy changes were making entry into the market more affordable. The first quarter of the year injected fresh energy into a market that had shown resilience but lacked momentum in 2024. Drawing insights from data provided by Lightstone, BetterBond, and FNB, Paul Stevens, the CEO of Just Property, delves into the current state of the sector and what we can anticipate for the remainder of the year.
Looking back at 2024, it was a year characterized by economic pressures and hesitancy among buyers. The FNB House Price Index reported a mere 0.3% year-on-year growth in October, down from 0.5% in September. The housing market in Gauteng, the largest in the country, saw prices drop by 2.6%. However, coastal areas in the Western Cape saw an increase in prices due to sustained demand from semi-gration. Mortgage volumes started to rise in the fourth quarter, with BetterBond noting a 6.6% year-on-year increase in applications and an 8.1% rise in approved home loans.
Rental markets outperformed expectations in 2024, with national average rent increasing by 4.8% year on year in Q3. The Western Cape led the way with a 9.3% growth rate. Tenant affordability improved, arrears decreased to near-record lows, and average rent remained below 30% of household income.
Moving on to Q1 of 2025, insights from Lightstone’s transfer data paint a clearer picture of the market post-pandemic. The High Value segment (properties valued between R700,000 and R1.5 million) accounted for the largest share of activity, both in terms of volume (33.8%) and value. The Mid Value segment (properties valued between R250,000 and R700,000) followed closely behind with 32.9% of the volume, although its share of value was lower at 18.3%, reflecting affordability constraints.
First-time buyers remained active in these segments, with 16.9% purchasing in the High Value category and 16.4% in the Mid Value range. The average spend for first-time buyers was R1.2 million in the High Value segment and R557,000 in the Mid Value segment, indicating a strong trend of entry into the middle-market. Some buyers also ventured into the Luxury segment (properties valued between R1.5 million and R3 million), with an average spend of R2.2 million.
Regulatory changes have been supportive of this positive momentum. As of April 1, 2025, properties priced under R1.21 million were exempt from Transfer Duty Tax, reducing upfront costs for many buyers. Additionally, while the repo rate remained unchanged at 11% in the March monetary policy announcement, the Deeds Office implemented a revised fee structure from April 1, including a new lodgement fee and the requirement for all fees to be paid in advance.
Looking ahead, there are opportunities to be found in the details. If inflation continues to decrease, potential rate cuts could improve affordability and stimulate further buyer activity. Recent announcements from the United States regarding increased tariffs on imported goods could indirectly impact the South African property market. Disruptions in global supply chains or rising costs for building materials could lead to tighter margins for developers and delays in project timelines. It’s crucial for investors and developers to monitor these developments closely, especially if their projects rely on imported materials.
In conclusion, here are some key takeaways for different players in the market:
– For first-time buyers: Properties under R1.21 million are now exempt from transfer duty, providing an ideal entry point. Consider the High Value segment for long-term appreciation.
– For investors: The rental market remains strong, particularly in the Western Cape. Locations with low arrears and rising rent-to-income ratios offer good prospects for yield.
– For developers: Keep an eye on supply chains for materials sourced internationally. Rising costs could present opportunities to explore new suppliers or adjust pricing.
– For commercial buyers: The industrial sector shows promise, especially in logistics and light manufacturing hubs. Niche or repositioned office properties may offer long-term potential.
– For all buyers: Stay informed about inflation, interest rate decisions, and policy changes in the second half of 2025, as these factors will impact affordability and investment decisions.
With a solid start in Q1 and policy adjustments making housing more affordable, 2025 could be the year that the South African property market shifts from recovery to renewed growth.
