Is South African property still a smart investment?

• Nominal house prices rose about 38% since 2020, but inflation and rand weakness diluted real returns for many investors.

• Lifestyle regions, rentals and industrial assets outperform while offices and some luxury housing still lag.

• Local property offers control and income stability, but offshore diversification and liquidity remain key considerations.

Smart bet or slower builder?‍

South Africans have long treated property as the cornerstone of wealth creation. It is tangible, familiar and often seen as safer than financial markets.

But the past five years have complicated that narrative. Rising interest rates, inflation, semigration, currency volatility and infrastructure challenges have reshaped the property landscape.

Today, the question is no longer simply whether property is a good investment, but what role it should play in a diversified portfolio. Two industry voices illustrate the debate.  

Harry Scherzer, CEO of Future Forex, takes a cautious, globally comparative view. Paul Stevens, CEO of Just Property Group, argues that local real estate still offers powerful long-term advantages.

Together their perspectives reveal a more nuanced reality.

The real return question

On the surface, property has delivered respectable growth. South African residential property prices increased roughly 38% between 2020 and 2025. However, inflation tells a different story.

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“After adjusting for inflation, real price growth has been far more modest than many people expected,” says Harry Scherzer. “Real house prices rose only about 1% in 2023 and just over 1% in 2024.”

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Momentum improved in 2025 as interest rates eased and political stability improved following the formation of the Government of National Unity.

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Yet compared to global markets, the gap remains clear. “The global real estate market returned around 11% in 2025,” Scherzer explains. “South African property simply hasn’t kept pace once currency movements are factored in.”

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Sector Performance: Not all property is equal

One of the clearest trends is that different sectors are performing very differently.

Residential property key trends

• Western Cape leading national growth

• Lifestyle and semigration markets outperforming

• Rental demand strengthening

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“The Western Cape has clearly been the standout performer,” says Scherzer. “Semigration has pushed house price inflation to nearly 9.5% compared with roughly 1.7% in Gauteng.”

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Remote work has accelerated this trend as people increasingly choose where they live based on lifestyle rather than proximity to the office.

Commercial property
Commercial sectors show an even sharper divergence.

Strong performers:

• Industrial and logistics property

• Neighbourhood retail centres

• Flexible modern office space

Weaker sectors:

• Older office stock

• Some luxury residential segments

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“Industrial property has benefited from structural shifts in supply chains and e-commerce,” says Scherzer.

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At the same time, certain retail formats have proven surprisingly resilient. “Smaller community shopping centres that serve everyday needs are outperforming larger regional malls.”

The case for local property

Despite the modest real returns in recent years, many industry leaders argue that South African property still offers compelling advantages.

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According to Paul Stevens, CEO of Just Property Group, the latest market data suggests confidence is returning. “BetterBond data shows home loan applications are up 16% year on year and more than 23% above the low point in 2023,” Stevens notes.

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Lower interest rates are playing an important role. “With the prime lending rate now around 10.25%, affordability has started to loosen in a way the market can feel.”

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Another barrier is also easing. “Average deposits for first-time buyers are down roughly 20% year on year,” he says. “That’s significant because deposits are often the biggest obstacle to entering the market.”

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The advantage of investing close to home

Stevens also highlights the practical advantages of local property ownership. “Property is an investment you live with, even when you don’t live in it,” he explains.

Owning locally allows investors to:

• Monitor assets more easily

• Work with trusted local professionals

• Understand neighbourhood dynamics

• Respond quickly to changes in rental demand

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“In uncertain global conditions, investors are placing a higher value on control and familiarity,” Stevens says.

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Rental markets strengthening

Another factor supporting property investment is the rental market.

The PayProp Rental Index shows average rents reached R9,286 in Q3 2025, with growth of around 4.9% year-on-year.

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For investors this creates a valuable income component. “Local property can deliver a combination of rental income and long-term capital appreciation,” Stevens says.

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Affordable housing in particular remains supply-constrained and continues to show resilient demand.

Structural challenges investors must consider

Even supporters of property investment acknowledge that the market faces several structural headwinds.

Key risks include:

• Currency volatility affecting global returns

• High transaction costs when buying or selling

• Infrastructure and municipal service disparities

• Liquidity constraints compared to financial assets

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“Property is fundamentally illiquid,” Scherzer explains. “Selling a property can take months and transaction costs can significantly reduce returns.”

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Municipal governance is another increasingly important factor. “Areas with reliable infrastructure and functioning municipalities are clearly outperforming.”

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Property’s role in a diversified portfolio

Ultimately, the debate is not about whether property works, but how it fits into a broader investment strategy.

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“If you expect equity-style returns or double-digit growth every year, property will likely disappoint,” says Scherzer.

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However, that does not mean the asset class has lost relevance. “Rental yields in South Africa remain strong by global standards, particularly in supply-constrained areas.”

Stevens agrees that the key is strategic selection. “Focus on the fundamentals: location, affordability, rental demand and the strength of your professional team.”

The Bottom Line

South African property is no longer the simple wealth-building formula it once appeared to be. It is an asset class shaped by macroeconomics, infrastructure, demographics and global capital flows.

For investors, the reality sits somewhere between the two perspectives.

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As Harry Scherzer puts it: “Property isn’t the guaranteed wealth builder many people once believed.”

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But as Paul Stevens argues: “For investors who choose the right locations and hold for the long term, local property remains a powerful foundation for building wealth.”

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In other words, property still works, but only when approached strategically.

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