Understanding the current landscape of South African property investment

South African property has always been more than just an investment for most of us. It represents security. A tangible asset you can see and touch, and for many, the cornerstone of family wealth. This deep attachment to property ownership has shaped how South Africans build their portfolios for generations. But the past five years have challenged many of the assumptions we've held about property as a reliable wealth creator.

Interest rates soared, the rand weakened, and entire neighbourhoods saw their character transformed by people moving between provinces. If you own property or you're considering buying, the question isn't simply whether property is good or bad, it's whether property still makes sense for your specific situation, especially when compared to what's happening in global real estate markets.

The numbers from 2020 to 2025 paints an interesting picture. South African residential property prices rose about 38% in nominal terms over these five years. That sounds impressive until you account for inflation, which ate away at much of that gain. In real terms, house prices increased just 1% in 2023 and 1.2% in 2024 after adjusting for inflation. The recovery came in 2025, with house prices growing 5.2% year on year as of March, according to Statistics South Africa. This improvement followed interest rate cuts by the Reserve Bank and reduced political uncertainty after the formation of the Government of National Unity. For homeowners who weathered the tough years, 2025 brought some relief.

But when you compare South African property to what's happening globally, the picture becomes more complex. The FTSE EPRA Nareit Global Real Estate Index shows that global real estate returned 11.04% in 2025. South African property hasn't kept pace with these global benchmarks, particularly when you factor in currency movements and the reality that we don't have the same depth of liquid, tradeable property investments that international markets offer.

Residential versus commercial: two different stories

The gap between how residential and commercial property have performed over the past five years is worth understanding if you're thinking about where to put your money. Residential property has grown, but not evenly. The national average house price crossed R1.6 million for the first time in mid-2025, but that headline number hides massive differences between regions. 

Stats SA’s Residential Property Price Index observes that the Western Cape saw particularly strong growth, with the province recording house price inflation of 9.5% contributing 3.7 percentage points to the national 5.2% growth rate, whilst Gauteng contributed just 0.6 percentage points with growth of 1.7%. This disparity reflects more than just lifestyle choices. Remote work has allowed people to prioritise where they want to live rather than where they have to live.

Commercial property has faced its own set of challenges and opportunities. Industrial property has been the standout performer, benefiting from the boom in online shopping and the need for efficient logistics while office property tells a more complicated story. The oversupply that hit after everyone started working from home between 2020 and 2022 has started to correct, especially in prime locations. Cape Town's CBD recorded historically low vacancy levels in 2025. The offices that have done well are smaller, flexible, high-quality spaces in mixed-use developments. The old model of large corporate office towers has struggled more. Retail has stabilised in neighbourhood shopping centres but larger regional malls continue to face pressure.

Structural realities shaping South African property returns

South African property faces a set of structural constraints that materially affect returns, risk and flexibility. Compared to global real estate exposure through listed funds or REITs, local property remains highly illiquid. Most investment is still direct ownership, meaning capital is slow and costly to unlock. 

Even in improving market conditions, selling a property can take months, with transfer duties, legal fees and agent commissions eroding returns. While time on market shortened in 2025, South Africa remains structurally slower than mature markets where desirable assets trade quickly, creating real opportunity costs for investors who need to rebalance or redeploy capital.

Currency volatility compounds this challenge. For investors with offshore exposure or those measuring wealth in dollars or euros, rand movements can materially distort returns. Periods of rand weakness may flatter foreign-currency performance, but they often coincide with broader economic fragility that weighs on property fundamentals. When the rand strengthens, foreign returns compress even as local prices rise. For domestic households, currency weakness erodes purchasing power and indirectly constrains affordability, limiting how much buyers and tenants can spend on housing.

At the same time, domestic fundamentals have become increasingly uneven. Municipal governance and infrastructure quality are driving value divergence. Areas with reliable electricity, water and services are outperforming, while deteriorating infrastructure depresses demand elsewhere. Reduced load shedding and rising solar adoption have helped, but energy security remains a structural consideration.

Interest rates continue to be the primary demand lever. After peaking in 2024, rate cuts through 2025 restored affordability and activity, lifting home loan applications and buyer confidence. However, long-term demand remains mixed: a large housing undersupply supports prices in theory, but high unemployment and affordability constraints cap owner-occupier demand, reinforcing strong rental yields. As semigration dynamics evolve and price gaps narrow between provinces, diversified regional exposure increasingly offers better risk-adjusted outcomes than concentration in a single market.

The bottom line: it depends on what you're trying to achieve

So, is South African property still a good investment? The honest answer is that it depends entirely on what you're trying to achieve, how long you can hold, and where it fits in your broader financial picture. If you're expecting double-digit annual returns comparable to equity markets or high-growth international property, South African property will likely disappoint you. Real returns after inflation have been modest over the past five years, and whilst nominal growth has picked up in 2025, it's still well below historical averages and global benchmarks. 

But if you have realistic expectations, a long-term view, and the willingness to actively manage property, there are opportunities in South African real estate. Rental yields are compelling by international standards, particularly in markets with tight supply, affordable housing has shown resilient demand and stronger price growth than luxury segments, and industrial and logistics properties have benefited from lasting changes in how people shop and how businesses manage supply chains. And, if you're willing to do your homework on regional differences, selective investments in high-growth areas or improving markets can deliver solid risk-adjusted returns.

South African property remains a viable part of a well-structured portfolio, as long as you approach it with realistic expectations, do thorough research, and position it strategically. It's not the guaranteed wealth builder that tradition might suggest, nor is it the disaster that pessimists sometimes claim. It's a complex asset class that rewards informed, patient, and diversified approaches whilst penalising those who invest based on emotion or outdated assumptions without paying attention to changing fundamentals.

* Scherzer is the CEO of FutureForex.

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