Ever since the market crash in 2008 and 2009, the South African housing market has been growing. While lower than the levels experienced before the market crash, the
, including throughout the coronavirus pandemic. Compared to house prices,
at less than one percent as of the last quarter of 2021. Still, the value of investment allocated to commercial real estate in South Africa
in 2021, reaching 20.5 billion South African rands. The retail sector has traditionally enjoyed the most investment, but in 2021, investment in the alternative, living, and hospitality sector surged. This was mainly at the expense of the industrial and office sectors.
How much does buying a home cost in South Africa?
Depending on the location,
the average price of residential properties in South Africa can reach up to 1.6 million South African rands. Situated in the West Cape province, Cape Town is one of the three capital cities in South Africa, as well as the second-largest city in the country after Johannesburg. In Johannesburg, house prices were lower but still above the one million South African rands mark. While prices vary widely depending on the location and the type of property, most of the residential property transactions f
all within the price range of over 1.2 million South African rands. This was slightly higher than the
average amount of mortgage loans to first-time buyers. Within the rental market, Mpumalanga was
the province where rents grew the most, whereas the Western Cape was
the province with the most expensive rent.
How has the pandemic impacted the commercial real estate sector?
As a result of the coronavirus pandemic, the office real estate sector suffered an increase in vacancies. Approximately
19 percent of office space in Johannesburg was vacant as of the first quarter of 2022. With fewer occupiers interested in renting commercial real estate, property owners face pressure to decrease rents.
Rental rates for office space fell slightly between 2020 and 2022, while for retail space, they halved. Prime yields, which measure the expected return of an investment property, were the
lowest for industrial property. Though lower yields suggest lower profitability, they are a sign of a competitive market with strong demand where property investment costs and rental growth are high. In such markets, the risk of a tenant defaulting on payments or the property undergoing longer vacancy periods are low, which is reflected in the lower yield.
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