Even with inflation rising to 4%, property prices are still growing in real terms, if only marginally.
Image: Chumani Mazwi
South Africa's residential property market is primarily propelled by sentiment and affordability.
According to Heschel Jawitz, CEO of Jawitz Properties, the most recent interest rate increase from the South African Reserve Bank (SARB) will likely put both of these factors to the test.
Delivering the Statement of the Monetary Policy Committee (MPC) last week, Lesetja Kganyago, Governor of the South African Reserve Bank(SARB), said the committee decided to increase the policy rate by 25 basis points, to 7%, effective from May 29.
He says that over the last six months, the residential market has benefited from falling interest rates and improved consumer confidence.
“The BER Consumer Confidence Index is clawing its way back to a neutral position, having last been in positive territory in 2019, and interest rates have come off a high of 11.75% in May 2023 to 10.25% before the latest rate increase.”
From an affordability point of view, the CEO says a first-time buyer with a home loan of R1 million is paying R1,000 less than a year ago, with zero transfer duty on purchases below R1.21 million. He says the bank lending environment remains positive, with banks fighting for market share and buyers benefiting from competitive rate concessions. #
“ABSA's latest House Sentiment Index for Q1 2026, which tracks buyer, seller and investor sentiment, shows the highest sentiment measure since the report's inception in 2015, with 90% of those surveyed between the ages of 25 and 34 believing that home ownership is still aspirational.”
According to Jawitz, the result is a residential market growing at 5.7% according to First National Bank's House Price Index, its best post-Covid level when rates were at a historic low of 7%.
He says even with inflation rising to 4%, property prices are still growing in real terms, if only marginally.
“The 0.25% rate increase will add just R168 per million rand of home loan to monthly repayments, but this comes off the back of significant fuel price increases and rising electricity costs that consumers already absorb annually.”
The property company says residential property still offers excellent value outside of areas like the Western Cape, and demand continues to exceed supply in the market across sales and rentals, creating a favourable environment for buyers, sellers and investors alike.
It adds that tenants tend to be more price-sensitive to cost increases and disposable income pressure, which may result in rental prices flattening. Investors would do well to hold onto paying tenants, even at lower escalations, it adds.
On how long SA remains in a high fuel cost environment, Jawitz says a high inflation environment will determine how the market holds up and whether buyers adopt a more cautious approach. “The longer-term outlook for residential property remains positive, but in the short to medium term, the market's resilience will be tested.”
Meanwhile, payment processor PayProp says rental agents can capitalise on renewed demand in inland markets and the widening gap between properties to let in the Western Cape and elsewhere.
It says that growing evidence suggests that return-to-office mandates are driving a new phase of ‘reverse semigration’, as professionals who relocated to coastal areas are increasingly being pulled back to economic hubs like Gauteng.
The company says various media reports are pointing to a shift in housing demand away from the coast and back towards inland provinces, and it is starting to be reflected in broader housing sentiment data.
According to Absa’s latest Homeowners Sentiment Index, confidence in inland property markets increased in Q4 2025, while coastal sentiment remained relatively flat, signalling a potential rebalancing after years of one-way traffic, it adds.
“Reverse semigration is starting to create real momentum in inland rental markets,” says Michelle Dickens from PayProp South Africa.
“As professionals return to the office, many are opting to rent before making longer-term property decisions, particularly in a market where affordability remains under pressure.”
But a mass return to the office is not the only factor driving movement.
According to PayProp’s latest Rental Index, the affordability gap between coastal and inland provinces is becoming more pronounced, with average rents in the Western Cape more than R2 400 a month higher than in Gauteng.
This disparity is increasingly affecting tenant behaviour, particularly among young professionals who are being priced out of coastal markets.
“Rising costs in coastal markets, particularly the Western Cape, are beginning to limit accessibility for some tenants,” Dickens explains. “Inland provinces offer a more affordable entry point while still providing access to major employment hubs, which is a deciding factor for many renters.”
The proximity to work, reduced commuting time, urban lifestyle living and easy access to amenities are reasons behind the shift in demand – all of which are difficult to find in the Western Cape outside Cape Town or spread-out other business centres, Dickens also points out.
For rental agencies, she says this presents both opportunity and urgency.
“Agents in inland areas are likely to see increased demand from returning semigrants, particularly in well-located properties close to business districts,” says Dickens. #
“Agencies could capitalise on this trend by actively marketing to Western Cape residents and highlighting the value proposition of inland living.
"Understanding where tenants are moving, and why, and adapting rental strategies accordingly will be key to unlocking growth in the year ahead.”
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