A growing number of buyers and renters are being priced out of the market, amid limited housing stock and surging property values, prompting early signs of a reverse migration trend.

According to national Deeds Office data, the South African housing market remains under pressure, with unit sales sluggish across the board. While interest rates saw a marginal decline in recent months, they remain well above pre-pandemic levels – and that’s hurting affordability and market momentum.

“Despite a fairly active month in May, as well as a marginal decline in the prime lending rate, homebuying activity during Q2 2025 could not match the performance of Q1 2025 […] The residential property market still has a long way to go before breaching the levels of activity experienced at the beginning of 2021,” – July BetterBond Property Brief

“Until there is a more meaningful reduction in interest rates or a notable improvement in economic conditions, we can expect the market to remain somewhat subdued in terms of units sold,” said Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

Despite these national headwinds, RE/MAX of Southern Africa has reported robust growth. Registered sales rose 11.7% year-on-year in Q2 2025, with pending sales up by 18.9%. Listings on remax.co.za were snapped up in just 6.3 days on average – a pace largely driven by Western Cape demand.

This surge in demand has pushed stock levels dangerously low. In the Western Cape, many listings are already under offer by the time they reach public portals. But Goslett warns that this environment isn’t sustainable.

“Driven by sustained demand, property prices in the Western Cape have surged beyond the reach of many buyers, particularly those who are unable to match the region’s value when selling property in other provinces,” said Goslett.

Rent Soars, Affordability Plummets

Social media users recently expressed outrage after two modest Cape Town apartments made headlines for their eye-watering rent: one in Green Point listed at R22,000 per month, and another in Durbanville asking R16,000 – despite broken appliances and poor finishes.

Users pointed out that equivalent rentals in Johannesburg cost far less.

This anecdotal evidence reflects a broader trend. According to PayProp’s 2025 State of the Rental Industry report, nearly 80% of rental agents say affordability concerns are driving tenants out of the Western Cape.

“Living in Cape Town is becoming prohibitively expensive,” said Renier Kriek, MD of Sentinel Homes.

From 2020 to 2025, average property prices in Cape Town jumped from R1.6 million to R2.1 million. Meanwhile, Johannesburg prices have remained largely flat, hovering between R1 million and R1.5 million.

“Obviously the higher capital values mean that people who buy for investment require a higher nominal return, which means the rents go up,” said Kriek.

PayProp’s Rental Index supports this, reporting that the Western Cape posted 9.6% year-on-year rental growth in Q1 2025, with average rents reaching R11,285 per month – significantly higher than in Gauteng (R9,201), KwaZulu-Natal (R9,170), or the Eastern Cape (R7,330).

Rent Control Debate Intensifies

Amid rising costs, calls for rent control in Cape Town are growing louder. However, Kriek cautions against it, saying such policies often worsen housing crises, especially for low-income earners.

“Rent control leads to underinvestment and poorly maintained units as landlords have limited incentives to maintain or expand their rental stocks,” said Kriek.

“Rent control is the most efficient technique currently known to destroy a city – short of bombing.”

Systemic Market Failures

The affordability crisis runs deeper than interest rates or semigration trends. According to Lightstone, over 80% of South Africans – those earning under R26,000 per month – are priced out of formal housing. For every 3.3 low- to middle-income families, only one formal house exists.

Kriek points to government inaction and systemic market design flaws as core issues. Since 2000, South Africa’s population has grown by 19.3 million, but only 1.9 million new formal homes have been added.

“There’s something very wrong if such a large demand is not being met […] no real solutions are forthcoming from the government actors who are responsible for solving these problems,” said Kriek.

He argues that resolving the crisis requires national-level reforms:

• Economic Growth: South Africa needs consistent, pro-growth policies and better management of public funds.
• Labour Reform: Current labour laws inflate costs and stifle job creation.
• Vocational Training: The shortage of artisans is pushing up building costs.
• Currency & Trade Adjustments: Imports outpace exports; SA must reindustrialise and incentivise local production.

Bottlenecks Inside the Property Market

Even within the property sector, a host of structural barriers are driving up costs and restricting supply:

• Regulatory Red Tape: Approval timelines for new developments stretch from months into years, bogging down progress.
• NIMBYism: Community objections frequently stall or block projects in court, adding risk and expense for developers.
• Unfavourable Tax Structures: Fixed utility charges and regressive rates increase the cost of owning and developing low-income housing.
• Small Unit Disincentives: Building small homes is costlier per square metre, yet the market desperately needs more affordable stock.

“The government can offset this deterrent with better tax breaks, or programmes that release land to developers to build only small, affordable homes,” Kriek said.

Landlords and Lenders Under Pressure

Increasing tenant default rates further complicate the picture. According to TPN’s Squat Index, tenants who haven’t paid rent for three consecutive months and remain in occupation rose from 3.48% in Q4 2023 to 3.71% in Q2 2024.

Evictions are legally complex and costly. The Prevention of Illegal Eviction Act (PIE), originally intended to protect land squatters, also applies to defaulting tenants – leaving landlords vulnerable.

“If we don’t allow strict enforcement of payment obligations, then landlords won’t invest in rental housing, which is the easiest and the quickest way […] to fix our housing undersupply,” Kriek said.