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The year 2024 was marked by pivotal changes for South Africa, setting the stage for a cautiously optimistic 2025.
It was perceived that a turning point had been reached, where the economy began to recover from years of stagnation.
John Loos, senior economist at FNB commercial property finance, said the developments were attributed to a combination of political, economic, and infrastructural improvements, which offered hope for a more favourable property market in the coming year.
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Declining interest rates and easing inflationary pressures had shaped economic trends in 2024.
“By October, the Consumer Price Index (CPI) inflation rate had fallen to a remarkable 2.8%, the lowest seen in years. This downward trend prompted the South African Reserve Bank (Sarb) to initiate interest rate cuts, with two 25-basis-point reductions implemented by the year’s end.”
These actions were viewed as improving economic conditions, both domestically and globally, as the international interest rate cycle also shifted downward.
The formation of a government of national unity (GNU) was deemed investor-friendly, fostering a sense of stability and progress.
Competitive elections further reinforced the idea that political accountability and reform were being prioritised.
“These shifts were considered essential for addressing the long-term economic ‘super-cycle’ that had influenced the property market for over a decade.”
Loos added the property sector, in particular, had felt the impact of economic stagnation over the past 10 to 15 years.
“Data revealed that when adjusted for GDP inflation, All Property net operating income in 2023 was 11.8% lower than its peak in 2016. Similarly, capital values per square meter had declined by 21.7% over the same period.”
He said while slight improvements were observed in 2022 and 2023, these were largely attributed to normalisation following the disruptions of the COVID-19 pandemic rather than sustained growth.
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Loos said there are three key developments in 2024 that were seen as potential catalysts for change.
The first was the unexpected resolution of load shedding, which had long plagued the country’s economy. While initial scepticism was widespread, the absence of power outages persisted even after the elections.
“This development not only enhanced production capabilities but also hinted at improved government service delivery, a critical factor for long-term economic growth.”
He said the second improvement was observed in the country’s infrastructure.
“Reports of progress in harbour facilities and the restoration of railway operations signalled a revival in the Freight and Logistics Sector.”
These advancements were celebrated for their potential to boost trade and economic activity, further solidifying the foundation for growth.
Loos said the third factor contributing to optimism was the broader global economic context.
With international interest rates declining and signs of a strengthening world economy emerging, the country stood to benefit from increased demand for its exports.
“These external dynamics were anticipated to complement domestic reforms, creating a more favourable environment for economic expansion.”
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“The interplay of these factors was expected to impact the property market positively. It was acknowledged that property demand is inherently tied to overall economic activity,” said Loos.
With improvements in governance, infrastructure, and global economic conditions, a gradual recovery in property values and sales activity was anticipated.
“Nevertheless, it was emphasised that cautious optimism should be maintained, as sustained growth would require continued efforts to address structural challenges.”
He noted that throughout 2024, commercial property brokers had reported subdued sales activity compared to previous highs.
The lingering effects of high interest rates earlier in the year were cited as a contributing factor.
However, as the rate cycle peaked and then began to decline, a more favourable lending environment was expected to emerge, potentially stimulating demand in 2025.
The improvements seen in 2024 were perceived as part of a broader narrative of recovery and resilience.
“South Africa’s economy, which had faced significant challenges over the years, was believed to be entering a phase of gradual turnaround.”
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Loos said residential development in 2025 reflects the growing influence of economic stabilization and regional dynamics.
Often viewed as a trendsetter in the South African property market, Cape Town continues to attract local and international interest.
The city’s emphasis on sustainable and high-end residential projects aligns with its reputation as a lifestyle and business hub.
“In Gauteng, the focus remains on affordable housing and urban densification to address the needs of its growing population.”
Mixed-use developments in Johannesburg and Pretoria are gaining traction, combining housing, retail, and office spaces to cater to the demand for convenient living.
KwaZulu-Natal, particularly Durban, is also witnessing an uptick in residential projects, driven by improved infrastructure and coastal appeal.
He added that Cape Town’s premium rental properties outperformed, driven by demand from professionals and expatriates. Coastal regions, such as the Western Cape and KwaZulu-Natal, also recorded steady rental demand, benefiting from their appeal as lifestyle destinations.
When it comes to Gauteng, the rental market has remained stable, with the affordable segment driving the bulk of activity.
“The increasing focus on student accommodation and middle-income housing reflects an effort to cater to the diverse needs of tenants in the province.”
Regional disparities persist, but rental yields are beginning to recover across most areas as economic conditions improve.
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