The State of South Africa's Residential Property Market in 2023

The South African residential property market has been through a series of transformations and challenges over the past two decades. From the heady days of 2004/5 when house price inflation soared to 37% to the more recent years of modest growth, the market has shown resilience and adaptability. As of August 2023, the market's total stock value stands at an impressive R6.8 trillion, reflecting its continued importance in the country's economy.

Source: Lightstone

Diverse Market Segments

South Africa's residential property market is a diverse landscape. In terms of volume, Freehold properties dominate, accounting for 81% of the market, with over 5.6 million units. Sectional Title follows at 12%, comprising 885,526 units, while Estates make up 7% with 465,324 units. This distribution highlights the variety of options available to homebuyers, each catering to different preferences and needs.

House Price Inflation

Since the global market crash of 2008/9, house price inflation in South Africa has ranged from 2% to 6%. This is a far cry from the spectacular 37% recorded during the boom years of 2004/5. In 2023, the Low-Value segment has performed the best, though it has tapered off to around 4%. In contrast, Mid Value, High Value, and Luxury Value properties have maintained price inflation around this level.

The data shows a stark contrast between the lowest and highest valuation price bands. Properties valued under R250,000 represent 25% of the volume but only 3% of the total value. On the other hand, properties valued above R3 million constitute only 5% of the volume but contribute 27% of the market's value. Properties under R1 million make up 69% of the volume but only 30% of the total market value. This illustrates that a significant portion of the country's property value is concentrated within a relatively small volume.

Source: Lightstone

Migration Trends

One striking trend in the South African residential property market is the migration to the Western Cape. The Western Cape has consistently been the top choice for those switching provinces, with numbers increasing year by year from 2018 to 2021 before stabilizing in 2022. This points to the province's attractiveness as a destination for homeowners.

While the Western Cape remains a popular choice for those switching provinces, the data indicates a shifting preference among migrating homeowners. The appeal of metropolis living, which accounted for 49% in 2018, has slightly declined to 42% in 2022. In contrast, small-town living is gaining traction, with migration numbers increasing from 22% in 2019 to 26% in 2022.

Source: Lightstone

Source: Lightstone

First-Time Buyers and Property Preferences

First-time buyers in South Africa tend to prefer Freehold properties, which made up 57% of their purchases in 2019. However, this percentage has slightly decreased to 53% in 2020, 2021, and 2022. Sectional Title properties, on the other hand, have become more popular among first-time buyers, rising from 31% in 2019 to 35% in 2022. Estates remained relatively consistent at 12% in 2019, with a brief peak at 13% in 2020 and 2021, before returning to 12% in 2022.

Buyer Demographics

Most property buyers in South Africa fall within the 36-49 year age band. They are followed by those aged between 50-64, with younger buyers under the age of 35 accounting for the third-largest group. The smallest category of buyers is those above 65. This distribution suggests that a broad spectrum of age groups is actively participating in the property market.

Source: Lightstone