South Africa's housing market continued its upward momentum in October 2025, with Statistics South Africa's latest house price indices showing further acceleration in year-on-year growth.
National average house prices rose 6.8% from a year earlier, up from 6.3% in the previous quarter, highlighting a strong recovery in the property sector.
This improvement marks a significant turnaround from the slower growth of around 1.5% recorded at the end of 2023. The data suggests new confidence among buyers across the country, supported by low interest rates and strong demand in key regions such as the Western Cape.
This year-on-year rate is well above CPI (consumer price index) inflation, indicating positive real (inflation-adjusted) growth of 3.14% in October.
However, the long-term history of this index since its inception in January 2010 paints a picture of cumulatively average performance.
Since January 2010, the average real (CPI inflation-adjusted) national house price has declined cumulatively over almost 16 years. The October 2025 real (CPI inflation-adjusted) house price index was still -1.4% below January 2010 levels. I believe this largely reflects a decade and a half of average economic growth in South Africa, which has hindered growth in employment and households' income (household purchasing power).
Western Cape remains outperformer
The Western Cape, the outperforming residential market among the major SA markets, was the largest contributor to the overall national house price growth rate. StatsSA gives that province 3.5 percentage points of the 6.8% national house price growth rate.
The Western Cape's year-on-year house price growth rate in October 2025 was 9.1%, close to double digits, while Gauteng was a much slower at 4.6% and KZN, the third major residential market, at 3.3%. However, all three major markets have seen recent home price increases.
While the Western Cape's consistent outperformance compared to other key regions has much to do with that region's key positive structural characteristics, the recent short-term cyclical acceleration in all three regions is believed to be largely driven by the South African Reserve Bank's (Serb) interest rate cut from September 2024.
The Western Cape has been benefiting from better attracting and retaining skilled and high-income households compared to other provinces in recent decades.
This group of households not only directly provides purchasing power for residential property, but is also a major driver of the modern economy and job creation. And better economic performance in such a region can also mean better property-market performance.
Sectional title playing “catch-up” with freehold
The data also shows that average house-price growth for sectional-title properties is closing the growth gap with freehold homes, after lagging in recent years.
This is perhaps not surprising, as first-time buyers are likely to be more inclined to purchase smaller sectional-title homes, and this group comes out of the woodwork in greater numbers when interest rates decline. This is because they rely heavily on debt to finance their home purchase, so interest rates matter.
new versus existing homes; building improvements
The environment for new residential-construction activity appears to have improved recently, and thus moderate growth is expected in 2026. Building costs have been challenging for the residential-development sector in recent years.
Matters are not made easier by weakness in existing home-price growth during the period of high interest rates until the end of 2024, making the price of existing homes very competitive against newly sold homes.
However, the recent increase in demand for existing housing and the resulting acceleration in house price growth have narrowed the “outperformance gap” of new homes compared to existing homes. Existing homes have recently been outpacing newly sold homes in terms of value growth, with the former increasing by 7.4% year-on-year, while the latter increased by only 3.3% in October 2025.
New homes are thus gradually becoming more able to compete price-wise, and this could contribute to a moderate increase in new construction activity in 2026.
house price peak 2026
It is believed that Srb will likely continue to keep interest rates unchanged for most of 2026, waiting for some near-term increase in inflation pressures to pass through the CPI. If we have to make any further interest rate cuts in 2026, it is expected to be right at the end of the year. This implies less residential demand growth stimulus in 2026 compared to 2025.
The result is expected to be that national house-price growth will peak at one stage in the first half of 2026, before a gradual deceleration in the second half and through 2027. Still, overall a solid average 6% home price growth is expected for 2026. In short, 2026 is expected to be the peak in terms of average annual house-price growth in the current short-term cycle.
The main risk to expectations of solid average home-price growth in 2026 is the conflict in and around Iran, which poses a greater risk of a prolonged oil-price shock.
A prolonged period of high oil prices, and the resulting inflation surge, could prompt the Serbs to start raising interest rates “early”.
But while this is a risky scenario, the base case is one where the conflict is resolved, the large release of oil reserves is enough to offset the large deficit during the conflict, and any increase in inflation is short-lived.
All rights reserved. © 2026. Bizcommunity.com Syndicate Media Inc. Provided by (Syndigate.info).