December 10 2025 14:00
After battling against affordability challenges and sluggish sales activity in 2024, South Africa’s residential property industry defied the doom-and-gloom forecasts for 2025, staging a steady recovery fuelled by long-awaited interest rate cuts, Grant Smee, CEO of Only Realty Group said.
“We end 2025 with the prime lending rate a full percentage point lower than January now at 10.25%, and with economists expecting two further 25-basis-point cuts by mid-2026, the outlook is looking bright for would-be property investors,” he said.
He said that ongoing diplomatic tension between the US and South Africa had a detrimental effect on the strength of the rand, particularly after the implementation of tariffs in August – but that like the residential property market, it has only come back stronger, rebounding by 13% over the course of the year.
“The rand’s recovery has been aided by a revised lower inflation target, a move that over time will increase consumer spending power and enable more buyers to enter the property market,” he said.
Smee said these are the five major trends that he believes will dominate the local residential property market in 2026:
1. House Price Inflation set to stabilise
House Price Inflation (HPI) skyrocketed in 2025, outpacing consumer inflation for the first time since the pandemic and enabling property owners to realise real-value appreciation on their assets. With this upward trend seen as a ‘turning point’ in aiding the residential property industry’s recovery, expect a more modest 2026.
“The majority of forecasts are predicting that growth will moderate in the new year, reflecting the normalisation of the market in the post-rate-cut rebound surge seen in 2025. While positive growth is still expected, it’s unlikely to reach the levels of last year, which isn’t necessarily a bad thing as it lowers the barrier for entry to the market, particularly for first-time buyers,” said Smee.
“However, we expect HPI to still be evident in the low to mid purchase price bands, particularly in the case of well-priced homes in coastal areas where property values are appreciating due to demand from semigrants,” he said.
2. Gen Z’s appetite for rentvesting fuelled by social media
With the oldest members of Gen Z turning 29 in 2026, this cohort is now established in the local job market and increasingly eager to invest their growing disposable income in assets that deliver real returns.
However, according to ooba Home Loans, the average first-time homebuyer in South Africa is 36, indicating that Gen Z buyers remain outliers. While most adult Gen Zs have no option but to rent due to affordability constraints, others are driven by aspiration, as living in a luxury property is often far more attainable as a tenant than as an owner.
This tension has fueled the rise of “rentvesting”, whereby young investors purchase buy-to-let properties in more affordable areas to generate passive income while renting homes that align with their desired lifestyle.
“As a tech-savvy generation, many Gen Zs are turning to social media for financial advice, where TikTok ‘fin-fluencers’ like Jack Henderson have racked up millions of views sharing the wealth-building benefits of rentvesting, but they’re also watching lifestyle creators curate picture-perfect homes that amplify young buyers’ aspirations. It’s a powerful combination – and it can work – but only if you avoid overextending yourself. No investment is worth drowning in debt just to keep up appearances,” said Smee.
3. Increased return to office calls drive sectional title demand
The Golden Age of remote work that flourished during the pandemic is waning, with more South African corporates calling employees back to the office. This move is often intended to strengthen company culture, but also places the many semigrants who moved away from major cities in search of lifestyle benefits in a challenging position.
Sectional title properties are increasingly becoming their solution. “FNB’s 2025 Property Barometer showed both higher sales volumes for sectional title units and, for the first time since the pandemic, sectional title equity values outpacing freestanding homes. This is a positive indication that the lock-up-and-go lifestyle is not only in demand, but also delivering excellent returns on investment,” aid Smee.
“As buyers find themselves spending less time at home, many are willing to trade extra space for proximity to the office and to schools. And with affordability still a major concern and sectional title properties often priced lower, especially when bought off-plan, I have no doubt that this demand will only accelerate in 2026,” he said.
4. Foreign buyers turn their eyes to Gauteng
Foreigners poured billions into South Africa’s residential market in 2025 with an average purchase price of R2.7m per home per Lightstone data, roughly R1m more than that paid by local buyers.
While most activity remains concentrated in the ultra-luxury bracket above R10m, the knock-on effects are significant, as foreign spending power pushes up prices not only in premium suburbs but also in adjacent mid-value areas. Smee notes that although the Western Cape has felt these effects most acutely, Gauteng, a province that has historically attracted the highest volume of foreign buyers, may see a surge of renewed international interest in 2026.
“Johannesburg’s strong showing during the G20 Summit, combined with service-delivery improvements and infrastructure upgrades, has significantly elevated its global profile. As the country’s economic hub, with proximity to embassies and renewed international visibility, the province is well positioned to draw even more foreign investment in the year ahead,” said Smee.
5. Expect greater regulation on short-term rentals
Increased foreign interest is affecting not only the homebuying market but the rental market too. A 2025 GroundUp article confirmed what many Cape Town residents long suspected: a severe shortage of inner-city rental stock, with roughly 70% of residential units now hotel-managed or listed on Airbnb.
This imbalance is likely to widen in the coming summer months as landlords responding to strong demand from tourists and digital nomads, shifting stock away from long-term leases and toward more profitable short-term letting. As a result, some residents are being priced out of historically affordable areas like Woodstock and Salt River due to their proximity to the CBD.
Smee expects renewed calls in 2026 for stricter short-term letting regulations as local concern grows. “The City of Cape Town will need to strike a balance between encouraging tourism and avoiding the path of cities like Barcelona, where short-term rentals are being banned to protect residents from overtourism. With mounting political and community pressure, I expect the City to consider frameworks such as capping the number of days a property may be let and tightening zoning laws,” he said.
“With rates easing, the rand strengthening and clear demand drivers emerging, investors who remain informed and adaptable will find compelling opportunities across every segment of South Africa’s residential property landscape,” said Smee.
247@propertyflash.co.za
