For the better part of five years, South Africa’s property market has been a study in misery. Load-shedding dimmed office lights and drove tenants away. The pandemic emptied retail centres, some of which have never fully refilled. Rising interest rates crushed affordability for homebuyers and stretched commercial landlords to breaking point. And a stagnant economy made every investment feel like a gamble.
But the tide, it appears, is turning.
New data from the MSCI South Africa Annual Property Index, released on Wednesday, has sent a jolt of optimism through the sector. Total returns held steady at 12%—a robust performance by any measure—driven largely by strong income returns of 8.5%. More significantly, capital values turned positive for the first time in years, adding a collective R12.7 billion to property portfolios across the country.
Investors are returning. Confidence is rebuilding. And while significant challenges remain, the property market is showing clear, measurable signs of recovery.
“We have turned a corner,” said MSCI head of real estate for Africa, Nomsa Dlamini. “The numbers are unambiguous. After a long period of pressure, the market is stabilising, and in some segments, it is actively growing. Investors who stayed the course are being rewarded. And those who left are starting to come back.”
The Numbers: A Sector-by-Sector Breakdown
The MSCI index, widely regarded as the most comprehensive measure of South African property performance, tracks returns across office, retail, industrial, and residential sectors. The 2025 results tell a story of uneven but unmistakable recovery.
| Sector | Total Return | Income Return | Capital Growth |
|---|---|---|---|
| Industrial | 14.2% | 8.9% | +5.3% |
| Township Retail | 17.8% | 10.2% | +7.6% |
| Suburban Retail | 10.5% | 9.1% | +1.4% |
| CBD Retail | 6.2% | 8.5% | -2.3% |
| Office (Grade A) | 7.8% | 9.2% | -1.4% |
| Office (Grade B/C) | 2.1% | 7.5% | -5.4% |
| Residential | 11.3% | 6.8% | +4.5% |
| All Property | 12.0% | 8.5% | +3.5% |
Source: MSCI South Africa Annual Property Index 2025
The standout performer, perhaps surprisingly, is township retail—delivering a stunning 17.8% total return, far outpacing every other segment. That performance reflects both the resilience of township economies and the growing sophistication of retail offerings in areas long ignored by major developers.
“Township retail is no longer an afterthought,” said property economist Dr Francois Viruly. “It is a primary investment destination. The spending power in South Africa’s townships is immense, and it is growing. Developers who recognised that early are now reaping the rewards.”
Industrial property, long a steady performer, continued to lead in overall returns, driven by the e-commerce boom, the growth of logistics, and the need for warehousing close to major urban centres.
“Industrial is the new office,” said real estate analyst John Loos of FNB. “The shift to online shopping, the need for distribution hubs, and the decline of traditional manufacturing have all worked in industrial’s favour. It is where the smart money has been going for years.”
Retail in traditional suburban malls performed respectably, though growth was modest. CBD retail, particularly in Johannesburg and Durban, continued to struggle, weighed down by crime, decay, and the flight of office workers who never returned to city centres after the pandemic.
The office sector remains the market’s problem child. Grade A offices in prime locations held their own, supported by tenants who value quality and security. But Grade B and C buildings—older, less secure, less efficient—continued to bleed value, with capital declines of more than 5%.
“The office market is bifurcating,” said Dlamini of MSCI. “The best is holding value. The rest is falling away. That trend will continue.”
The Driver: Income Returns Lead the Way
Unlike the boom years of 2010–2015, when capital appreciation drove double-digit returns, the current recovery is powered by income—the rent that flows from tenants to landlords.
At 8.5%, income returns are at their highest level in a decade. That reflects both rising rentals in high-demand sectors (industrial, township retail) and the impact of inflation-linked leases, which automatically increase rents each year.
“Rent is the anchor of this recovery,” said Viruly. “Capital growth is welcome, but it is volatile. Income is steady. It is predictable. It is the reason investors are coming back. They need yield, and property is delivering it.”
The gap between income return and capital growth—8.5% vs 3.5%—is telling. Property is no longer a speculation game. It is an income game. And for investors seeking reliable cash flow, the numbers are increasingly attractive compared to bonds, equities, and cash.
The Standout: Township Retail’s Remarkable Run
The 17.8% return from township retail is the headline number, but the story behind it is more nuanced.
Township retail has been transforming for two decades. What was once a landscape of spaza shops, street vendors, and the occasional small supermarket is now dotted with modern shopping centres featuring national tenants, international brands, and sophisticated amenities.
Developers like Flanagan & Gerard, Resilient, and Vukile Property Fund have led the charge, building centres in Soweto, Tembisa, Umlazi, Motherwell, and other townships across the country. These centres are often fully occupied, with waiting lists of tenants eager for space.
“The township consumer is loyal, spendthrift, and underserved,” said Nondumiso Ncapai, a retail analyst at Broll Property Group. “When you build a quality centre in a township, people come. They spend. And they keep coming back. That is a formula for success.”
The COVID-19 pandemic, paradoxically, boosted township retail. While suburban malls in wealthy areas suffered as white-collar workers shifted to remote work, township centres remained busy—their customers were essential workers who could not work from home.
Post-pandemic, that momentum has continued. Rising food prices, high transport costs, and the growth of the informal economy have pushed more spending into local township centres.
“People are shopping closer to home,” said Ncapai. “They cannot afford the petrol to drive to a big mall in Sandton or Rosebank. So they go to their local township centre. And those centres have responded by improving their offerings. It is a virtuous cycle.”
The challenge for township retail is not demand—it is supply. Building in townships is expensive, given the cost of land, security, and infrastructure. And crime remains a persistent threat, with some centres suffering repeated burglaries and cash-in-transit heists.
But for now, the rewards are outweighing the risks.
The Investor Profile: Who Is Buying?
The MSCI index measures performance, not transactions. But separate data from property advisory firms shows a clear shift in who is buying South African property—and why.
Private investors are the most active segment, accounting for nearly 40% of all transactions by value in 2025. These are wealthy individuals, family offices, and small partnerships looking for yield in a low-growth economy.
“Private investors are not afraid of property,” said Pam Golding commercial property expert Andrew Golding. “They see the income returns. They see the stabilising capital values. They are putting their money where their mouths are.”
Owner-occupiers are also driving activity, particularly in the industrial sector. Small and medium-sized businesses that have long rented are taking advantage of lower prices to buy their own premises.
“Renting is dead money,” said Johan van der Merwe, a manufacturing entrepreneur who bought a warehouse in Kempton Park last year. “I was paying R80,000 a month. Now I pay R60,000 on a bond. It is my asset. It will appreciate. Why would I not buy?”
Institutional investors—pension funds, insurance companies, and real estate investment trusts (REITs)—are more cautious but are slowly returning. They were burned by the office sector collapse and are now focusing on industrial and retail.
“Pension funds have a long-term horizon,” said Viruly. “They can afford to wait. They are watching the market, learning from the data, and selectively deploying capital. They are not rushing back. But they are coming back.”
Foreign investors remain largely absent, deterred by South Africa’s weak currency, political uncertainty, and crime concerns. But there are signs of renewed interest from European and Asian funds, particularly in the logistics and warehousing space.
“International money is patient money,” said Dlamini. “They are not looking for a quick flip. They are looking for long-term, stable, rand-hedged returns. Industrial property in South Africa fits that bill.”
The Regional Divide: Cape Town Leads, Gauteng Lags
While the national numbers are positive, the regional story is uneven. Cape Town remains the country’s most attractive investment destination, followed by Durban’s premium nodes, with Gauteng—South Africa’s economic heartland—lagging.
Cape Town benefited from semigration—the movement of people and businesses from Gauteng and KwaZulu-Natal to the Western Cape. That has driven demand for housing, offices, and retail space, pushing up both rents and capital values.
“Cape Town works,” said Golding. “The city is well-run. The infrastructure functions. The crime rate, while not zero, is lower than Johannesburg. People want to live there. Businesses want to be there. That shows up in the property numbers.”
Durban, despite its well-documented challenges (floods, political instability, port inefficiency), has pockets of strength—particularly in the northern suburbs and along the M4 corridor. The city’s mild climate and lifestyle appeal continue to attract buyers.
Johannesburg and Pretoria are more mixed. The northern suburbs of Johannesburg—Sandton, Bryanston, Fourways—remain strong, particularly for industrial and premium retail. But the inner city and southern suburbs struggle with decay, crime, and tenant flight.
“Gauteng is not a lost cause,” said Loos. “But it is a tale of two cities. The best parts are very good. The worst parts are very bad. Investors need to be careful where they put their money.”
The Remaining Challenges: Load-Shedding, Rates, and Politics
The recovery, while real, is fragile. Several dark clouds remain on the horizon.
Load-shedding has eased in recent months, thanks to improved performance at Eskom’s coal-fired power stations and the delayed maintenance of the Kusile and Medupi units. But the risk of rolling blackouts remains. No investor can ignore the cost of backup power—generators, inverters, solar panels—which now runs to hundreds of thousands of rand per property.
“We have adapted,” said van der Merwe, the manufacturing entrepreneur. “Every building I own has solar. But that cost is not nothing. It eats into my returns. If load-shedding comes back hard, the numbers will change.”
Property rates and taxes continue to rise, driven by struggling municipalities that see property owners as a captive source of revenue. In Johannesburg, rates have increased by more than 15% over two years. In Tshwane, the increase has been even higher.
“Municipalities are squeezing property owners to fund their own inefficiencies,” said Golding. “It is shortsighted. Higher rates mean lower returns. Lower returns mean less investment. Less investment means a shrinking tax base. It is a death spiral.”
Political uncertainty—with national elections looming in 2029 and coalition governments in most major metros—adds another layer of risk. Investors hate uncertainty. And South Africa has it in abundance.
“No one knows who will be running Johannesburg in two years,” said Loos. “No one knows whether the Government of National Unity will hold. No one knows what the policy environment will be. That uncertainty keeps some money on the sidelines.”
The Outlook: Cautious Optimism
Despite these challenges, the consensus among analysts is cautiously optimistic.
MSCI expects total returns to remain in the 10–12% range for the next two to three years, supported by continued income growth and modest capital appreciation. Industrial and township retail will continue to lead. Office will lag. Residential will grow steadily, driven by demand for housing in well-located nodes.
“The worst is behind us,” said Dlamini. “We are not returning to the boom years of 2005–2008. That is not healthy. But we are returning to stability. And stability is what investors need.”
Transaction volumes are expected to pick up further in 2026 and 2027, as more investors feel confident enough to deploy capital. The R29 billion in sales recorded in 2025 is expected to rise to R40 billion by 2027.
“We are seeing the early stages of a new cycle,” said Viruly. “The question is not whether property is a good investment. It is which property. The days of buying anything and watching it appreciate are over. Investors need to be selective. They need to do their homework. They need to understand the micro-markets.”
The Human Story: Who Benefits from the Recovery?
Behind the numbers are real people—tenants, landlords, and communities whose lives are shaped by the property market.
For tenants in township retail centres, the recovery means better shopping experiences, more choices, and often, lower prices as competition heats up.
“I used to have to go to town for everything,” said Thandi Nkosi, a resident of Soweto’s Maponya Mall area. “Now I have a Pick n Pay, a Clicks, a McDonald’s. I can do all my shopping here. It saves time. It saves money. It is a better life.”
For landlords, the recovery means breathing room. After years of stress, vacancy rates are falling, rental arrears are declining, and properties are worth what they paid for them again.
“I thought I was going to lose everything,” said property investor Ahmed Patel, who owns several retail units in Lenasia. “The pandemic nearly killed me. But the last two years have been better. My tenants are paying. My properties are worth more. I can sleep at night.”
For communities, the recovery means jobs. Every new retail centre creates permanent employment for cleaners, security guards, cashiers, and managers. Every thriving industrial park creates jobs for factory workers, forklift drivers, and logistics staff.
“Property is not just about buildings,” said Ncapai. “It is about livelihoods. When the property market recovers, people get jobs. When people get jobs, the economy recovers. It is all connected.”
Epilogue: The Long Road Back
The property market’s recovery has been long and painful. Investors who bought at the peak of the last cycle have had to wait a decade to see their capital return. Developers who over-leveraged have gone bust. Landlords who could not adapt have been forced to sell at a loss.
But for those who stayed the course—who believed in the long-term value of South African property, who had the patience and the capital to ride out the storm—the rewards are finally arriving.
“We are not popping champagne,” said Dlamini. “We are just acknowledging that the patient is out of intensive care. There is still a long road to full health. But the worst is behind us.”
The MSCI index, with its neat rows of percentages and billions of rands, tells one story. The human story—of traders, tenants, landlords, and communities—is messier. But it is also more hopeful.
South Africa’s property market has been knocked down repeatedly. Each time, it has gotten up again. This time is no different.
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