South Africa’s property market is heading into 2026 on the defensive, as soaring construction costs and tighter regulations slow new development, prompting investors to focus on existing, adaptable assets.
Municipal governance and service delivery have also become key determinants of property value.
That shift, according to Waldo Marcus, director at TPN Credit Bureau, a firm that tracks credit and payment behaviour across South African businesses and industries, reflects a market increasingly pricing risk over growth.
Property performance, he argues, is no longer driven purely by location and demand but by the reliability of income streams, tenant quality and governance strength.
“With residential rental shortages pushing rents up by an expected 4.5%-5.5%, commercial rentals under pressure and growing gaps between well‑governed and poorly governed municipalities, property values are increasingly being driven by tenant quality, effective municipal service delivery and the ability of assets to withstand infrastructure failures,“ Marcus said.
The trend is evident in the Claremont CBD in Cape Town, which is the most sought-after investment destination.
Last year’s State of Claremont CBD report showed that the combined value of residential and commercial property rose 63.6% over the past decade, reaching R8.6bn in 2024/25. Commercial property accounts for R6.5 bn of that total.
Uneven landscape
Despite pockets of strong performance, the property landscape remains uneven. According to TPN, a persistent shortage of residential rental stock remains the primary driver of expected rental growth, while commercial property — particularly office space — continues to face headwinds. Vacancy rates, however, have improved in some segments due to limited new supply.
While residential rental stock shortages in the Western Cape are expected to ease, the question of affordability remains paramount, and rental growth is expected to slow.
— Waldo Marcus, director at TPN Credit Bureau
Expected residential rental escalations of 4.5%-5.5% this year will be driven by continued growth in key nodes in Gauteng. The commercial sector, especially office space, is expected to see softer growth, with escalations slowing to about 3%. Yet optimism remains high in specific segments, including storage, industrial hubs and convenience retail.
“While residential rental stock shortages in the Western Cape are expected to ease, the question of affordability remains paramount, and rental growth is expected to slow. The fourth quarter of each year typically sees a spike in shorter-term rentals in the province, fuelled by local and international tourism,” Marcus said.
Gauteng is set to keep pushing rental escalations higher, aided in part by a wave of commercial-to-residential conversions.
TPN says oversupply in the province’s commercial property market — particularly office space — is being absorbed through these conversions.
In the Eastern Cape, by contrast, rental growth is expected to remain flat, while KwaZulu-Natal continues to climb, though at a slower pace. There, demand is being driven by secure, high-end estates along the coastline.
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