Apartments and Townhouses drive SA’s new housing shift

• Residential building-plan values rose in the first half of 2026, with higher-density housing increasingly shaping the development pipeline.
• Affordability, security and lower running costs are pushing buyers towards compact apartments, townhouses and other managed residential formats.
• For investors, smaller units can offer broader tenant demand, but approvals must still translate into viable projects and completed stock.

South Africa’s residential development pipeline is beginning to reveal a significant shift in what developers believe tomorrow’s buyers and tenants will want.

The value of residential building plans approved by larger municipalities increased by R1.67 billion in the first half of 2026 compared with the same period last year, according to the latest building statistics from Statistics South Africa. Across all building categories, approved plan values increased 6.1%, or R2.8 billion. (Stats SA)

Behind the headline numbers is a broader move towards higher-density, lower-maintenance residential living as affordability, security, location, energy costs and changing household structures influence what South Africans want from their homes.

For developers and investors, this is important because building-plan approvals are forward-looking: they provide an indication of where development capital is being committed before the resulting properties reach the market.

Just Property CEO Paul Stevens believes the changing development pipeline reflects how households are responding to financial pressure.

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“With the prime lending rate at a steep 10.5%, annual consumer inflation at 4.3%, recent electricity tariff hikes, and the rising costs of accommodation and utilities, it’s easy to see why people are making different financial decisions,” says Stevens.

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The trend is not simply about abandoning traditional houses. Freehold homes remain important, particularly for families wanting space and independence. Rather, developers are increasingly responding to another part of the market: buyers and tenants looking for smaller, secure and more manageable properties where monthly costs are easier to control.

Stats SA's rental data reinforces the strength of demand across these housing types. In June, annual rental inflation was 5.4% for townhouses, 4.6% for flats and 3.7% for houses. (Stats SA)

The costs of living and renovating

‍The shift towards newer and more compact housing is also being influenced by the cost of maintaining and upgrading older properties.

According to Stevens, households are increasingly considering the total cost of occupation, rather than simply the purchase price. That includes electricity, water, security, maintenance, insurance, levies and the capital expenditure required to modernise an older property.

The building statistics provide another interesting signal. While residential building-plan values increased during the first half of 2026, the value of approved plans for additions and alterations declined by R459.4 million, or 3.2%. (Stats SA)

For Stevens, this suggests some households may be reconsidering expensive renovations in favour of newer properties offering more predictable operating costs.

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“As a rough starting point, renovating an older home costs anywhere from R12,000 to R18,000 per square metre, and up to R30,000 - R45,000/m² when you add solar, generator and water systems,” he says. “By contrast, new sectional title units typically range between R16,000 and R22,000/m², many of which come with integrated energy features.”

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The investment calculation is therefore changing. An older freestanding property may offer more land and potential for value-add, but buyers need to factor in what it will cost to renovate, maintain and increasingly make that property energy- and water-resilient.

A newer sectional-title development can offer less space but potentially greater predictability around capital expenditure and maintenance.

The buyers

‍The clearest beneficiaries of the shift are likely to be first-time buyers, young professionals, downsizers and rental investors. First-time buyers are particularly important.

BetterBond reported that the average purchase price for first-time buyers reached approximately R1.4 million in May, while house-price pressures and rising deposit requirements continue to affect affordability. (Betterbond) That makes the pricing of smaller apartments and townhouses increasingly relevant.

Stevens says young professionals are seeking compact units close to employment and lifestyle nodes such as Rosebank, Cape Town's City Bowl and Umhlanga, where location can compensate for reduced floor space. For this market, the priorities are increasingly:

• Affordability: A lower total purchase price and potentially smaller financing requirement.
• Location: Proximity to employment, transport, retail and lifestyle amenities.
• Security: Controlled access and managed environments.
• Efficiency: Smaller spaces with potentially lower electricity and maintenance costs.
• Convenience: Lock-up-and-go living with less direct property maintenance.

Retirees and downsizers represent another important segment. Selling a larger family home and moving into a smaller apartment or townhouse can release equity while reducing maintenance and improving security.

Then there is the rental market. Smaller units can appeal to young professionals, students and smaller households, while purpose-built student accommodation and co-living models are creating additional niches for developers and institutional investors.

Approvals vs completions: the number investors must watch

‍There is, however, an important caveat. An approved building plan is not a completed property. Stats SA reported that while the value of total building plans approved increased 6.1% during the first half of 2026, the value of buildings actually completed across all categories declined 3.0%, or R699.5 million. (Stats SA)

Residential buildings were more resilient: the value of residential completions increased by R384.8 million compared with the first half of 2025. The overall decline in completions was driven principally by non-residential buildings. (Stats SA)

That distinction is important for interpreting the market correctly. Plan approvals tell us about development intention and pipeline.
 Completions tell us about actual new supply reaching the market.

A growing pipeline combined with slower overall completions can reflect construction delays, financing constraints, infrastructure bottlenecks, project phasing or developers deliberately controlling the release of stock.

For property investors, the next 12 - 24 months will therefore be critical. The real test will be how much of the planned higher-density residential pipeline gets built and whether demand absorbs it at the rentals and selling prices developers are targeting.

Semigration is reshaping where development happens

‍The trend towards compact and secure housing is also intersecting with South Africa's continuing semigration patterns. Different markets are developing their own characteristics:

• Western Cape: Cape Town, the Helderberg and Garden Route continue to attract lifestyle and semigration demand, supporting apartments, sectional title and secure-estate development.
• Gauteng: Pretoria East, Midrand, Sunninghill, Randburg and other employment-linked nodes offer a deeper affordability spectrum and substantial rental markets.
• KwaZulu-Natal: Ballito, Salt Rock and Umhlanga remain important North Coast lifestyle and residential investment nodes.
• Eastern Cape: Gqeberha continues to attract demand spanning established coastal homes and lower-maintenance townhouse living.

The important investment principle is that higher-density housing is not one national market. A 35m² apartment in Cape Town, a townhouse in Pretoria East and a sectional-title unit in Ballito have different tenant pools, supply dynamics, price points, levies and achievable yields.

The investor takeaway

‍The latest development numbers point towards an evolving residential market rather than the disappearance of traditional housing.

Freehold houses still offer space, land and long-term scarcity value.‍

But apartments, townhouses, student accommodation and other higher-density formats are increasingly aligned with some of the strongest forces reshaping residential property: affordability, urbanisation, security, household size, energy efficiency and the desire for predictable monthly costs.

For investors, the opportunity is therefore not simply to buy a smaller unit because apartments appear to be gaining popularity. The real opportunity lies in identifying where demand is growing faster than viable supply.

That means interrogating: Purchase price. Rental demand. Achievable yield. Levies. Rates. Vacancy. Competing development pipeline. Energy resilience. Location. Tenant profile. Resale liquidity.

Stevens believes compact units can offer investors lower vacancy risk and attractive rental demand when they are correctly located and priced.

But the Stats SA numbers also provide an important warning: approved supply does not automatically become completed supply and completed supply does not automatically become successful investment stock.

The strongest opportunities are likely to be developments where affordability, location and operating efficiency converge with genuine rental or owner-occupier demand. That is the bigger trend emerging from South Africa's building pipeline and one developers and property investors should be watching closely. (Stats SA)

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