Good news for complexes and sectional titles in South Africa

The latest FNB House Price Index (HPI) remained steady in July, averaging 3.7%. This marks a big shift as house prices are now rising faster than inflation, which stood at 3% per the latest figures.

Notably, for the first time in the post-pandemic era, equity values generated by sectional titles outpaced those of freestanding homes, 3.8% vs. 3.7%. 

This means that South Africans who own sectional titles are starting to see real increases in their property values and are essentially starting to profit from their investment. 

Property is one of the most popular asset classes, but it has failed to see growth in South Africa in recent years amid elevated interest rates, poor economic growth, and a suppressed job market.

Siphamandla Mkhwanazi, FNB Senior Economist, said that the shift in buyer sentiment towards sectional title properties likely reflects evolving lifestyle preferences and affordability constraints. 

Following a relatively aggressive hiking cycle and persistent real wage underperformance since 2021, buyers appear to be gravitating toward more compact and cost-effective housing. 

In addition, with more companies embracing the back-to-office trend, the need for larger spaces, once driven by work-from-home requirements, has diminished. 

The pandemic-induced premium for bigger homes appears to have waned. The upward trend in sectional title values persists despite a seemingly pre-emptive response from developers. 

Year-to-date, the supply of new flats and townhouses is typically sold or leased as sectional titles rose to 4,866, up 13.5%. 

However, this increase follows years of decline and should be viewed in the context of base effects. 

Pipeline supply remains weak, and year-to-date, building plans approved by municipalities for new flats and townhouses are down 21.2%, suggesting continued supply constraints. 

This imbalance will likely further support price growth in the sectional title segment, especially in well-located areas with strong amenities and transport links.

The lag in new approvals could reflect developer caution amid regulatory delays, rising costs, and uncertainty around municipal service delivery.

“Overall, current and projected supply dynamics support a sustained upward trend in sectional title property values,” said Mkhwanazi. 

“These developments reinforce our view of a broader residential price cycle, underpinned by easing inflation, lower borrowing costs, and modest real wage gains.” 

Looking ahead

The future of South Africa’s property has become less clear after the South African Reserve Bank (SARB) recently announced a shift toward a 3% inflation target. 

After cutting the repo rate to 7% in July, the SARB announced that it would try to bring inflation down to the bottom end of its 3% to 6% target range. 

The move would see the Monetary Policy Committee focus its interest rate decisions to inflation of 3%, down from 4.5% current midpoint target. 

The Reserve Bank has recently been able to keep inflation around this level since October 2025, benefiting from high base effects. 

Although National Treasury and Finance Minister Enoch Godongwana, who set the inflation target, expressed anger over the move, SARB Governor Lesetja Kganyago is confident that the parties “will find each other.”

This will likely have long-term benefits for property values but will also cause short-term pain.

“With inflation expected to rise in 2H25, we anticipate a prolonged pause in rate changes as the SARB guides expectations toward this new anchor,” said Mkhwanazi. 

Assuming success over the next two to three years, which historical precedents suggest can happen, there could be lower rates from 2027. This would see interest rates easing towards the 6% range by 2028. 

“Lower borrowing costs, alongside improving real wages and stable inflation, should support housing demand, particularly in the low- to middle-income segments, reinforcing the current upward price cycle.” 

Issued on BusinessTech by Luke Fraser | https://businesstech.co.za/news/property/835059/good-news-for-complexes-and-sectional-titles-in-south-africa-2/