Market Trends of South Africa Residential Real Estate Industry
This section covers the major market trends shaping the South Africa Residential Real Estate Market according to our research experts:
Increasing Demand for Sectional Title Living in South Africa
The purchase of freehold homes by South Africans has been steadily decreasing, with buyers opting for sectional title and estate homes instead. Increased security, affordability, and the communal lifestyle are attractive aspects when considering sectional title properties. A sectional title unit is a property in an undivided share of common property. These units are called townhouses, flats or apartments, and duet houses. Estate purchases remained consistent, with the growth of sectional title property of up to 5%.
An intriguing case study for the sectional title market is the emergence of Midrand, one of the fastest-growing growth centres in the nation. While Midrand's population has risen since 2000, the area has experienced a significant 550% increase in the number of sectional title homes, according to residential property analysis firm Lightstone. It illustrates how widespread this type of property ownership has become. Additionally, many people want to enter the real estate market while still having access to homes. Sectional title homes are a good entry point into the residential real estate market for first-time homebuyers because of their affordability.
Rental Prices Growth in South African Provinces
The South African housing market has been expanding ever since the market collapse in 2008 and 2009. The increase in home prices has stayed constant throughout the coronavirus pandemic while being lower than levels seen before the market meltdown. Rental growth has lagged behind the home price increase by less than 1% as of the fourth quarter of 2021.
Lower-than-normal demand in 2021 has fueled the high vacancies and low escalations across South Africa. Historically, the rental demand increased during tough economic times, which is not the case in the present scenario. The data show that few people are entering the rental market, and most of those rents are for less than ZAR 7,000 (USD 465.24) per month. Most provinces saw low rental growth and a deterioration in the average tenant's financial situation from Q2 2020 to Q2 2021. Below-inflation income growth has made it increasingly difficult to keep up with debt and other costs.
The average rent in Western Cape surpassed the ZAR 9,185 (USD 598.21) mark in Q2 2021, making it the most expensive province to live in. This rent has an average price differential of nearly ZAR 1,000 (USD 65.13) compared to the second-most costly region. In Gauteng, the average rent reached ZAR 8,292 (USD 540.05) for the first time in 2021, 4.84% more than the 2020 rent and the third-highest growth rate in the country for the quarter. While this rate was lower than the previous year, it was the province's first increase in quarterly growth in two years, implying the beginning of a recovering rental market in the area.
