South Africa’s housing market continued to build on its steady recovery in August 2025, with the latest FNB House Price Index (HPI) showing the fastest annual growth in more than three years. Despite muted mortgage lending, demand resilience, shifting buyer preferences, and regional momentum are underpinning the positive trend.
House price growth is at a three-year high
The FNB HPI accelerated to 4.5% year-on-year in August, up slightly from July’s revised 4.4% (previously reported at 3.7%). This marks the fourth consecutive month of real house price growth, and the strongest since May 2022, a period when interest rates were 275 basis points lower.
This resilience is particularly noteworthy given the still-elevated rate environment. As FNB notes, house prices are rising faster than inflation, signalling a housing market that remains in demand even under pressure.
Regional shifts: momentum beyond the Western Cape
The Western Cape remains the frontrunner in house price growth, supported by robust demand fundamentals. However, encouragingly for the broader market, Gauteng and KwaZulu-Natal, both stagnant earlier in the year, are now showing signs of recovery.
Price growth in these provinces is accelerating from a relatively low base, narrowing the gap with the Western Cape. This trend suggests a geographically expanding recovery, which bodes well for nationwide housing market stability.
Mortgage lending remains subdued
While demand and prices are on the rise, mortgage lending remains subdued. South African Reserve Bank (SARB) data shows outstanding mortgage balances grew just 2.0% y/y in July, a rate stuck in a narrow band for several months.
This highlights two possibilities:
-
Banks remain cautious, limiting new credit.
-
Consumers are hesitant to take on additional debt.
Either way, the current housing market upswing is not yet credit-driven, unlike previous cycles. A stronger credit expansion could provide the “tailwind” needed to extend and deepen the recovery.
Buyer preferences: smaller homes are still in demand
Insights from July’s report revealed that buyer preferences are shifting towards smaller, more affordable homes. Rising utility costs, municipal tariffs, and affordability concerns are pushing households to prioritise compact, cost-efficient living.
This aligns with the August data: even though prices are rising, affordability remains front of mind, and buyers are navigating the high-rate environment by targeting smaller, more manageable properties. This trend is especially visible in urban markets, where sectional title and townhouse developments continue to attract strong interest.
Outlook: watching the credit cycle
Looking ahead, the big question is whether easier access to home loans will start boosting the property market even more. If interest rates stay the same or begin to drop, homes will become more affordable for buyers. This could encourage more people to take out mortgages, while also making banks more confident about lending.
Without a stronger flow of credit, the recovery may remain uneven, with some areas doing well while others lag behind. For now, though, the mix of easing inflation, a softer stance from the Reserve Bank, and plenty of pent-up demand is keeping the market on a positive path in the short term.
In a nutshell
-
House prices rose 4.5% y/y in August, the fastest since 2022.
-
Western Cape leads, but Gauteng and KZN are catching up.
-
Mortgage lending growth remains weak at just 2.0% y/y.
-
Buyer demand is shifting to smaller homes as affordability pressures persist.
-
The recovery is resilient, but a credit-driven boost is needed for broader strength.
