South Africa’s housing market continued its upward momentum in October 2025, with the latest House Price Indices from Statistics South Africa showing further acceleration in year-on-year growth.
Source: Pexels.
National average house prices rose by 6.8% compared with a year earlier, up from 6.3% in the previous quarter, highlighting a strengthening recovery in the property sector.
The improvement marks a significant shift from the subdued growth of roughly 1.5% recorded in late 2023. Supported by easing interest rates and robust demand in key regions such as the Western Cape, the data suggests renewed confidence among buyers nationwide.
This year-on-year rate is well-above CPI (Consumer Price Index) inflation, which implies further positive real (inflation-adjusted) growth of 3.14% in October.
However, the longer-term history since the start of this index back in January 2010 paints a cumulatively mediocre performance picture.
Since January 2010, the average real (CPI inflation- adjusted) national house price has cumulatively declined over almost 16 years. The October 2025 real (CPI inflation-adjusted) house price index was still -1.4% below the level of January 2010. This I believe is largely reflective of a decade-and-a-half of mediocre economic growth in South Africa, constraining the growth in employment and income (home purchasing power) of households.
Western Cape remains the outperformer
The Western Cape, the outperforming residential market of the major SA markets, was the single biggest contributor to the overall national house price growth rate. StatsSA attributes 3.5 percentage points of the 6.8% national house price growth rate to that province.
The Western Cape’s year-on-year house price growth rate in October 2025 was 9.1%, nearing double-digits, while Gauteng was a significantly slower 4.6% and KZN, the third major residential market, 3.3%. All three major markets have seen house-price growth accelerating recently though.
While the Western Cape’s consistent outperformance over the other major regions has much to do with key positive structural characteristics in that region, the recent short-term cyclical acceleration in all three regions is believed to be overwhelmingly driven by the South African Reserve Bank (Sarb) interest-rate cutting since September 2024.
The Western Cape is increasingly benefiting from seemingly having better attracted and retained skilled and higher income households in recent decades, compared to other provinces.
This group of households not only directly provides residential property purchasing power, but is a key driver of a modern economy and job creation too. And an economic outperformance in such a region likely means property-market outperformance too.
Sectional title playing "catch-up" with freehold
It also appears from the data that average house-price growth for sectional-title properties has been narrowing the growth gap with that of freehold homes, after being a laggard in recent years.
This is perhaps not surprising, because first-time buyers are likely to be more inclined to buy smaller sectional-title homes, and this group does come out of the woodwork in greater numbers when interest rates decline. This is because they are heavily credit-dependent for their home purchases, so interest rates matter.
New versus existing homes; building improves
The environment for new residential-building activity appears to have improved recently, and moderate growth is thus expected in 2026. Building costs have reportedly been challenging for the residential-development sector in recent years.
Matters were not made easy by a bout of existing house-price growth weakness through the period of high interest rates up to late-2024, making existing homes very competitively priced against newly sold homes.
However, the recent pick up in existing home demand, and a resultant house-price growth acceleration, has narrowed the “outperformance gap” of new homes relative to existing homes. Existing homes have recently been outpacing newly sold homes in terms of price growth, the former growing year-on-year by 7.4%, while the latter only grew by 3.3% in October 2025.
New homes are thus gradually becoming more able to compete price-wise, and this could contribute to a moderate rise in new building activity in 2026.
House-price peak 2026
It is believed that the Sarb will likely continue to keep interest rates unchanged for much of 2026, waiting for something of a near-term escalation in inflationary pressure to pass through the CPI. If we are to have any further interest-rate cutting in 2026, it is expected to be right at the end of the year. This implies less residential demand growth stimulus in 2026, compared with 2025.
The result is expected to be national house-price growth peaking at a stage in the first half of 2026, before a gradual slowdown in the second half and into 2027. Nevertheless, a solid average 6% house price growth for 2026 as a whole is expected. In short, 2026 is expected to be the peak in terms of average annual house-price growth in the current short-term cycle.
The key risk to the solid average house-price growth expectation in 2026 is the conflict in and around Iran, which poses a major oil-price shock risk for as long as it lasts.
A prolonged period of high oil prices, and the resultant inflation surge that this can bring, can lead the Sarb to start hiking interest rates “early”.
But while that is a risk scenario, the base case is one where the conflict is resolved, major releases of oil reserves are sufficient to alleviate major shortages while the conflict lasts, and any inflation uptick is short-lived.
