Navigating change: how South Africa's property sector is finding stability after ten years

The South African property sector has operated in an uncertain landscape for much of the past decade. 

This was as challenges surfaced in succession, from geopolitical disruptions and domestic policy shifts to energy and logistics bottlenecks, says Andrew König, the CEO at Redefine Properties.  

He says recent developments suggest a turning point, with signals pointing to greater stability for long-term investment, including real estate.

“Lower inflation targeting, South Africa’s anticipated exit from the Financial Action Task Force (FATF) greylist and the prospect of a sovereign credit ratings uplift each carry different implications, but together they mark a shift in sentiment and suggest stability may be returning to the operating environment,” König says.

The company, which owns, develops and manages properties, says stability in the property sector depends on more than occupancy rates or yields.

It says it is shaped by the broader conditions in which investors, lenders and tenants make decisions. It adds that this is why three macroeconomic signals are worth noting together. 

“The Reserve Bank’s renewed push toward a lower inflation anchor signals a long-term commitment to interest rate stability. South Africa’s anticipated exit from the FATF greylist addresses a credibility gap that has weighed on sentiment.

"And the possibility of a sovereign credit rating upgrade from S&P Global Ratings in 2026 would directly affect the cost of capital.

“On their own, these signals do not resolve South Africa’s structural challenges. But together they help restore the predictability that long-term assets like property depend on to attract investment with confidence."

König says one of the clearest signals of stability is the Reserve Bank’s call for a lower inflation anchor, with debate centring on a 3% target. For property, he says the effects are nuanced.

“In the short term, lower inflation may slow rental escalations faster than property costs, particularly administered prices. That imbalance can place some pressure on margins.”

He adds that over time, however, the picture looks different. “A credible lower inflation target anchors expectations across the economy. Bond yields are likely to fall, funding costs could ease, and the risk premium applied to property valuations may narrow.

"For property owners and investors, the greater benefit lies in reduced volatility, which makes it easier to plan with greater certainty and commit capital for the long term.”

The company says that alongside monetary policy, governance signals also matter for stability. It says South Africa’s anticipated removal from FATF greylisting in October this year is more than a financial-sector milestone.

It adds that greylisting has meant onerous compliance, slower cross-border flows and a higher perceived risk profile. Its removal restores credibility, signalling that governance gaps are being addressed and making South Africa a more straightforward place to do business, paving the way for increased foreign direct investment, Redefine says.

For property, König says the benefit lies in perception and access. He says international investors are more willing to consider local assets when governance concerns ease, and reduced compliance friction helps capital move more freely.

Both effects improve the operating climate, supporting development pipelines and long-term projects, he adds. 

The CEO says that if monetary policy and governance set the stage, sovereign credit ratings influence the terms on which the play unfolds. He says a potential upgrade from S&P Global Ratings in 2026 would not just be symbolic. It would change the cost of capital across the economy. Property feels that shift more than most sectors, he adds.

“Because real estate projects are long-lived and capital-intensive, even a small reduction in borrowing costs can determine whether a development goes ahead or is shelved.”

König says an improved rating also expands the pool of international investors able to allocate to South Africa, as mandates often restrict exposure below certain thresholds. He says that opens the door to fresh capital flows and increases competition for quality assets.

“Together, these effects translate into more viable developments, healthier balance sheets and ultimately a sector better positioned to play its role in economic growth.”

The company says the property sector does not set monetary policy or credit ratings, yet it is among the first to feel their effects. “Capital-intensive and reliant on long-term funding, real estate responds quickly to changes in interest rates, investor sentiment and the broader risk profile of the country.

"What matters is how prepared businesses are to respond when the backdrop improves. Across the industry, resilience has come from focusing on fundamentals: keeping balance sheets healthy, investing in energy efficiency and adapting portfolios to shifting tenant needs.” 

Signals such as lower inflation targeting, progress on greylisting and the prospect of a sovereign ratings uplift are not guarantees of growth, says König. 

He says they are, however, signs that the operating climate is beginning to steady. “For a sector built on long-term assets, that steadier foundation matters. It allows decisions to be made with greater clarity, partnerships to form with more conviction, and investments to be considered with a longer lens.”

The direction of South Africa’s property sector is turning, and these signals provide a firmer base for inflation-beating growth, König says. 

Meanwhile, Investec says the listed SA property sector stages a comeback as market conditions improve. 

It says that after navigating a prolonged, challenging trading environment, the market has reached an inflexion point where multiple factors have converged to shift the dynamic and create powerful momentum.

These tailwinds are creating compelling opportunities for both local and international investors to capitalise on the market's renewed potential, the financial institution says. 

“South African real estate was the best performing sector in 2024, delivering close to a 30% total return, well beyond that of the All Share Index (ALSI) and All Bond Index (ALBI),” says Karl Priessnitz, the head of Real Estate Advisory, Corporate Finance at Investec Investment and Corporate Banking.

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