(Image: Sunday Edwards Holmes)
South Africa's housing market is showing new momentum, with buyers returning and banks becoming more willing to lend. But the recovery has been uneven, with some areas growing while others are still struggling.
For the first time in more than a year, home prices are rising in real terms, according to data from BetterBond. The company's latest asset brief, reported by IOLShows that both first-time and repeat buyers have recorded positive real price growth for the first time before the last quarter of 2024.
“Adjusted for inflation, this means an increase of 1.9% for all buyers and 0.2% for new buyers,” says Stephan Potgieter, CEO of BetterHome Group mortgage origination and BetterBond.
Statistics South Africa's residential property price index shows that residential property prices rose 6.8% year-on-year in October 2025, meaning a house worth R1 million a year ago will now cost about R1.07 million.
“Encouragingly, record prices were recorded during the first two months of this year – R1.66 million for all buyers and R1.35 million for first-time buyers,” Potgieter said.
Low borrowing costs are helping boost activity. Prime lending rates have declined by 1.50 percentage points since September 2024, while home loan applications are up 3% year-on-year in the first two months of 2026 and more than 18% higher than end-2023 levels.
“Strong income growth is having an impact on improving affordability, especially among buyers aged 51 to 60. This group now earns an average annual income equal to 58% of their typical home purchase price, representing an increase of 36% since 2022,” Potgieter said.
Overall, affordability has improved by an average of 5.1% annually. “These trends are consistent with Statistics South Africa data, which shows that formal sector incomes have grown by an average of 4.3% per year over the past four years,” Potgieter said.
While national trends are improving, regional performance is rapidly changing. Statistics South Africa data shows Limpopo has recorded the fastest house price growth, while the Western Cape dominates among the country's largest housing markets.
In contrast, some areas of Johannesburg remain under pressure. “House prices in Johannesburg's north-western suburbs have declined in real terms by 8.7% year-on-year. Although not as pronounced, average house prices have also declined in the south-eastern suburbs,” Potgieter said.
The Western Cape is made up of Strongest Asset Performer, “House prices continued to outperform, with strong nominal growth of 8.1% recording the highest average price of R2.27 million, supported by migration trends and continued demand,” Semigration said.
Houses there are also being sold fastest. “Underscoring the ongoing demand as a result of migration and other pull factors, the average sales time for homes in this province is also among the shortest – spending approximately six weeks and two days on the market,” Potgieter said. Statistics South Africa reports that house prices in the Western Cape recorded a 9.1% increase, meaning a property worth R1 million a year ago would now be worth about R1.09 million.
According to Seef Property Group, demand is increasingly focused on mixed-use neighborhoods. In leading Cape Town nodes, property prices have increased by between 30% and 50% over the past five years, with annual growth ranging between 12% and 16%.
Seef Century City licensee Helga Klemo says prices in the area have increased by more than 20% in the past two years. “Sellers and landlords are achieving good results right now as stock levels are low due to continued high demand”. The average sale price in Century City is now R2.835 million.
Mixed-use areas also attract investors due to strong rental demand, often yielding between 7% and 10%. Premium locations such as the V&A Waterfront offer lower yields of around 4% to 6% due to higher property prices.
However, new municipal proposals could impact the short-term rental market. According to Knox Cape Town, the City of Cape Town is considering reclassifying short-term rental properties that are not a primary residence from residential to business or commercial tariffs. This could increase rates by up to 135%.
“For property owners who rely on rental income – whether as supplemental revenue, pension income, or portfolio investment returns – it is essential to understand what these proposed changes could mean for net yields,” Knox said.
At R1 million, annual rates can rise from R4,044 to R16,824. At R5 million, they could rise from R32,680 to R84,120. These costs apply regardless of occupancy and can add between 4.5% to 6.5% to the operating expenses of many properties.
Demand is also gradually shifting to higher price ranges.
“There has also been a noticeable shift in market activity towards higher price brackets, with a meaningful increase in the share of homes priced above R2 million over the past two years. While the R500 000 to R1 million segment is the most active, its relative share is declining, suggesting a gradual rebalancing of demand as interest rates decline,” Potgieter said.
First-time buyers remain the key drivers of the market. Samuel Seiff, president of Seiff Property Group, says his purchases nationally account for between 46% and 48%. In Gauteng metros such as Johannesburg and Tshwane, first-time buyers make up about 41% of the activity, typically purchasing homes priced between R1 million and R1.3 million.
In lower-priced areas like the North West, the share of first-time buyers is as high as 52%. However, in the Western Cape, higher average prices – typically between R1.5 million and R1.8 million – reduce participation by about 36%.
Government policies continue to support entry-level buyers. The transfer fee exemption limit of R1.21 million reduces upfront costs, while subsidies and 100% home loans help new buyers enter the market.
According to BetterBond, recent budget changes, which include increasing the capital gains tax exclusion on the sale of a primary residence from R2 million to R3 million, could also provide additional support for homeowners.
(Source: IOL)