Property gains momentum as confidence lifts values

Property investment continues to grow, with retail still the largest component at 61%, although its share has edged lower as more capital flows into industrial and residential assets.

Rising capital values point to improving investor confidence and stronger underlying portfolio performance, according to the latest MSCI South Africa Real Estate Annual Index results to December 2025.

“Revaluations turned positive in 2025, adding R12.7bn and reversing the declines recorded between 2020 and 2022. Growth was further supported by net additions of R5.9bn, while higher sales than purchases reflected a shift towards core assets and away from noncore holdings,” the index said.

Another trend evident throughout 2025 is that Reits (real estate investment trusts) have remained net sellers of property, while private investors and owner-occupiers have been more active on the buying side of the market. Total sales for 2025 amounted to about R29bn, with a further R13bn recorded in the first quarter of 2026.

Meanwhile, all-property total returns remained stable at 12%, driven by an income return of 8.5% and capital growth of 3.3%.

Industrial property remained the standout performer in 2025, still leading the pack on returns, although the pace of growth has eased compared with the previous year.

Retail, meanwhile, has started to find firmer footing again, with improved capital growth pointing to a gradual recovery in sentiment.

Read: Commercial property recovery takes shape

“Township retail has delivered above-average returns for three consecutive years and was the best-performing retail segment in 2025 at 17.8%. Suburban retail, while steady, has trailed the other retail categories,” the index said.

The office sector also edged higher than in 2024 but continues to lag both retail and industrial, reflecting the slower pace of its recovery.

Residential was the only segment to move in the opposite direction, delivering a softer performance than the year before.

Cape Town continues to attract the highest levels of investment, reflecting strong confidence in future income growth and development viability. Johannesburg, by contrast, records the lowest capital expenditure intensity among the major cities, suggesting owners are focused more on maintenance than expansion, according to the index report.

At the same time, direct property returns have steadily recovered alongside the broader economy since 2022, rising from near zero to about 12% over five years.

With economic growth expected to remain modest at around 1.5% to 2%, the sector is likely to stay supported, although global geopolitical uncertainty could still weigh on sentiment in 2026.