South Africa’s property market continues to present investment opportunities, but current economic conditions reinforce the importance of careful financial planning and property-specific due diligence.

Higher borrowing costs, inflation and rising operating expenses affect both residential and commercial property owners. Although parts of the market are showing resilience, investment performance will depend on more than property price movements alone. Rental income, tenant demand, financing arrangements and the costs of maintaining an asset remain central to assessing whether an investment is sustainable.

Residential Market Shows Resilience

Data from ooba Home Loans for the third quarter of 2026 indicates that South Africa’s residential property market has continued to operate despite affordability pressures.

The national average residential purchase price increased by approximately 5% year-on-year to around R1.76 million. Home loan application volumes also rose by 2.1% compared with the previous quarter, suggesting that buyer activity has not disappeared, although affordability remains a constraint.

Competition between banks has created opportunities for qualifying borrowers to negotiate more favourable lending terms. However, access to finance does not automatically make a property a sound investment. Buyers still need to assess the purchase price, repayment obligations and expected ownership costs against their financial position.

These residential indicators provide useful context for the broader property market, but they should not be treated as direct evidence of commercial property performance. Commercial assets have different income structures, tenant requirements and operating risks.

Commercial Property: Investment Remains Selective

Recent retail property transactions illustrate that investors continue to consider established income-producing assets.

One notable example is Dipula Properties’ proposed acquisition of a retail portfolio valued at approximately R2.04 billion. Announced in August 2026, the transaction covers nine retail assets across four provinces. The Competition Commission subsequently recommended approval of the relevant transactions in October, subject to the remaining applicable approval processes.

The transaction highlights continued investor interest in established retail properties. However, a large acquisition does not mean that every retail property represents a suitable investment. Asset performance depends on factors such as tenant quality, lease terms, rental collections, vacancy levels, maintenance requirements and the financial strength of the surrounding trading area.

New retail developments also demonstrate ongoing investment in selected locations. Nevertheless, the long-term performance of a development depends on whether it can attract and retain tenants and generate sufficient income to support its costs.

For commercial property investors, the distinction between a property that attracts attention and one that produces dependable returns is particularly important.

Financing and Operating Costs Matter

Interest rates and inflation remain important considerations when evaluating property investments. Higher financing costs can reduce the income available after debt repayments, while increases in utilities, security, insurance, maintenance and other operating expenses can place further pressure on net returns.

A property's rental income should therefore be assessed alongside its full cost structure. Headline rental rates alone do not establish whether an asset is financially viable.

Before committing to an acquisition, investors should consider:

  • Rental demand: Is there a demonstrable market for the space, supported by the location and the needs of prospective tenants?

  • Income reliability: Are existing leases sustainable, and how exposed is the property to vacancies or tenant defaults?

  • Total operating costs: Have maintenance, municipal charges, insurance and other property expenses been properly accounted for?

  • Financing exposure: Can the investment withstand higher borrowing costs or a period of reduced rental income?

  • Purchase price: Does the expected income justify the acquisition cost and the risks involved?

These considerations are relevant to industrial, office, retail and other commercial property categories, although the specific risks will differ by asset type.

A Disciplined Approach to Property Investment

The current market does not suggest that investors should avoid property altogether. Instead, it reinforces the need to evaluate opportunities individually rather than relying on general market optimism or forecasts of future capital growth.

An investment should make financial sense under realistic assumptions about rental income, vacancies, operating costs and financing. Investors should also allow for unexpected expenses and changes in market conditions.

For commercial property owners and prospective buyers, understanding the fundamentals of an asset is essential to making informed decisions. Sustainable demand, dependable cash flow and manageable costs provide a more useful basis for evaluating an opportunity than price growth alone.

South Africa’s property market continues to offer opportunities, but careful analysis remains essential to distinguishing financially sustainable investments from those that may carry greater risk.

Source & Disclaimer

Original article title: Property is holding firm, but investors must be more selective
Original publisher: Real Estate Investor (REI)
Author: Neale Petersen, Founder and Editor-in-Chief
Publication date: 27 October 2026 (newsletter date)

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Note: The supplied newsletter's editor's-desk article was not identifiable as a separate webpage. The links above provide the publisher's website and related sources for verification.

Disclaimer: This article has been independently written and adapted by Osher Property Solutions for general informational purposes. It is not a reproduction of the original publication and does not constitute financial, investment, legal or tax advice. Market conditions and individual property circumstances vary. Readers should consult the original sources and obtain appropriate professional advice before making investment decisions.