After a second, very welcome, drop in the interest rate and inflation’s sharp upward trajectory seemingly curbed, investor sentiment is cautiously optimistic, and South Africans are once again looking to invest rather than divest with many turning to real estate which is traditionally regarded as one of the most stable investment options.
So says Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, who adds that, national rental vacancies are currently lower than they’ve been in eight years, and the repo rate adjusting, albeit slowly, now is an excellent time to enter the rental market.
“According to a recent TPN Vacancy Survey, average residential rental vacancies for the first three quarters of 2024 were 5.4% – the lowest since the survey was first published in 2016.
“Unsurprisingly, the Western Cape has retained its position as the province with the lowest number of vacant rental units in the country, followed by Gauteng where almost 40% of households live in rented accommodation.
“The lack of supply and strong demand caused residential vacancies in the Cape to drop to 1.51%, a notable 2.91% less than the national average and this trend looks set to continue.”
Geffen adds that although these two provinces are currently the proverbial rental gold mine for savvy investors there are several markets around the country that continue to show promising growth potential, economic resilience and strong rental returns.
“The trick is to do your homework and work with an experienced professional to understand which areas and property types are most sought-after. And, with the luxury rental market in many areas still being under pressure with higher vacancies, the lower to mid markets are generally the safer bet.”
Geffen breaks down the market in each area, sharing its strengths and best investment options:
Cape Town – The High-Value Market with Strong Long-Term Returns
Cape Town’s property market is characterised by high demand and resilient property values, with some suburbs once again seeing double-digit price growth. Areas like the Atlantic Seaboard, City Bowl and Southern Suburbs continue to attract both local and foreign investors but there are other areas like False Bay and the Western Seaboard which offer excellent comparative value with lower entry price points.
For investors looking to buy on the Atlantic Seaboard or in the city, luxury apartments and short-term rental properties are ideal as Cape Town’s strong tourism industry along with a high number of corporate travellers ensure that short-term rentals yield high returns.
Townhouses and flats in areas like Green Point, Sea Point, and Gardens are popular among young professionals and offer stable long-term rental returns.
In the Southern Suburbs, freehold family homes that are secure and well-priced are in very high demand as are homes in secure developments.
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Johannesburg – Economic Powerhouse with Affordable Housing Demand
Johannesburg is South Africa’s economic hub, and while it may not boast Cape Town’s coastal appeal, it has robust demand in certain segments, especially for affordable and middle-income housing.
The property market is known for its diversity, with growth areas emerging in suburbs that cater to working professionals. Areas such as Sandton, Rosebank, and Midrand show stable appreciation, while the demand for affordable housing has surged in suburbs like Roodepoort and Randburg.
In areas with high job density, such as Sandton and Rosebank, modern apartments are well-suited for investors targeting young professionals while many suburbs in Randburg and in and around Fourways are popular with young families, especially first-time buyers.
Additionally, affordable and low-income housing in outlying areas, such as Soweto, offers high rental yields, as demand for these properties remains high due to urbanisation trends and housing shortages.
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Midrand – The Growing Hub Between Johannesburg and Pretoria
Strategically located between Johannesburg and Pretoria, Midrand has experienced rapid development and is emerging as a prime location for residential and commercial real estate.
With its proximity to business hubs and infrastructure investments, Midrand has attracted a large number of young professionals and new residents and areas like Waterfall City and Carlswald are seeing exponential growth due to commercial expansion and lifestyle offerings.
Apartments and sectional titles are especially popular in Midrand, particularly in newer developments near Waterfall City, which are well-suited to young professionals. Additionally, office and retail spaces are valuable investments, as Midrand’s business infrastructure continues to grow.
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Pretoria – Government and Educational Hub with Stable Growth
Pretoria’s real estate market has long been stable due to its status as the government centre and home to a large student population. This stability makes it a preferred choice for investors seeking steady, long-term returns.
With high demand for rentals in neighbourhoods near universities and government offices, Pretoria has maintained stable property values. Suburbs such as Menlyn, Brooklyn, and Hatfield are popular with students and young professionals, making them high-demand rental areas.
Student housing and multi-unit rentals are ideal in Pretoria, particularly in neighbourhoods close to universities, such as Hatfield. Sectional title units, townhouses and duplexes also offer good returns in areas popular among young professionals and government employees.
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Durban’s North Coast – Coastal Living and Emerging Tourism Hub
Durban’s warm climate and scenic coastline make it an attractive location for property investors, especially with semigration having driven up demand. While property prices in Durban have historically been more affordable than in Cape Town, the city is experiencing rising interest from both local and foreign investors.
Areas like Umhlanga and Ballito, located on the North Coast, have seen considerable growth due to the increasing demand for coastal living and holiday rentals. These areas are also experiencing a construction boom with new developments catering to middle- and upper-income buyers.
Holiday rentals and beachfront properties aimed at the tourist market are particularly attractive options for investment buyers as they generally offer high rental yields. Additionally, family homes in gated estates are popular in suburbs such as La Lucia, which provides a mix of security and coastal appeal, making it a preferred choice for families and retirees.
5. The Garden Route – Scenic Retreats with Growing Popularity
The Garden Route, with its stunning scenery and desirable quality of life, has emerged as a favourite for retirees, remote workers, and those seeking a more relaxed lifestyle and towns like George, Knysna and Plettenberg Bay are seeing an influx of buyers looking for peaceful, high-quality living environments.
The market is currently largely driven by buyers relocating from cities in search of lifestyle properties and this has pushed property values up, particularly for homes with coastal views or in gated estates.
Estate homes and retirement properties are in especially high demand along this coastal strip, especially popular in George and Knysna. Holiday homes are another promising investment, as the area’s tourism industry is growing and provides a consistent demand for short-term rentals.
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Eastern Cape – Affordable Market with Untapped Potential
The Eastern Cape, particularly the cities of Gqeberha (Port Elizabeth) and East London, offers affordability and growth potential. This region is popular among first-time buyers and investors looking for value-for-money properties.
Due to the lower price points and ongoing infrastructural improvements, the Eastern Cape has been seeing steady growth in recent years and there’s an increasing demand for homes among younger buyers who prefer affordable living with proximity to the coast.
Affordable residential properties across the board in Port Elizabeth and East London are popular and multi-family homes and townhouses appeal to families and young professionals seeking cost-effective housing options.
