After months of economic uncertainty, South Africa’s property market is finally showing signs of momentum again. Falling construction costs, stronger buyer demand, and a rallying rand are helping to restore confidence in the residential sector. While high interest rates remain a drag on affordability, the latest indicators suggest that a turning point may be near - and that’s good news for both homebuyers and investors.

📉 Narrowing of the Buyers’ Market Range

Over the past year, a steady decline in the Construction Input Price Index (CIPI) - combined with a rise in the Residential Property Price Index (RPPI) - has narrowed the buyers’ market range, which peaked in mid-2024.

This trend reflects a strengthening in buyer activity, as the gap between building costs and property prices has tightened. With the Producer Price Index (PPI) at record lows, building materials are now more affordable, which could encourage developers and first-time buyers alike to re-enter the market.

Although the Monetary Policy Committee (MPC) held off on cutting rates again in September, the slight dip in the Consumer Price Index (CPI) offers some optimism. A repo rate reduction in November could finally ease the cost of mortgage financing - especially if the MPC takes a cue from the US Federal Reserve, which recently reduced its rates despite inflation still above target.

The takeaway? Stimulating the economy and supporting job growth should take precedence over keeping rates higher for longer. Lower borrowing costs would go a long way in helping more South Africans qualify for home loans and bring balance back to the property market.

🏗️ Modest Recovery in Construction Activity

The Afrimat Construction Index (ACI) for the second quarter of 2025 has ticked upward from its previous lows, signalling a slow but positive recovery in the construction industry. Although the seasonally adjusted trend remains subdued, the improvement in indicators such as building plans passed, buildings completed, and hardware sales is encouraging.

The prime overdraft rate’s marginal decrease during the same period also helped boost activity - proof that even small interest rate adjustments can have a meaningful effect on the sector.

In another promising development, the Ministry of Cooperative Governance and Traditional Affairs has announced the most comprehensive overhaul of local government funding and infrastructure rules in decades. If executed effectively, these reforms could unlock investment, stimulate housing development, and address the national housing shortage.

Still, for the construction sector to gain real traction, interest rates need to return to single-digit levels, similar to those immediately after the pandemic.

💪 Rand Strength Continues Through September

The South African rand has been one of the standout currencies of 2025, strengthening more than 9% against the US dollar since January. It’s outperformed several major currencies, including the euro, yuan, and pound - a rare and welcome boost for local confidence.

This resilience comes even as the US dollar index remains stable, suggesting that the rand’s performance is not just a result of dollar weakness but also improved investor sentiment in South Africa’s underlying fundamentals.

A stronger rand supports lower import costs and helps moderate inflation - both of which are positive signals for the broader property and financial markets.

Conclusion: A Market Finding Its Footing

After a challenging two years, the signs of renewed life in South Africa’s property and construction sectors are becoming clear. Lower input costs, a firmer currency, and the prospect of rate relief could all combine to spark a fresh wave of buyer activity and development opportunities.

For homebuyers, this means that 2025 could offer a unique window: before prices accelerate further but as affordability begins to improve.

At Phoenix Bonds, we’re here to help you navigate this changing market - from prequalification and application through to securing the most competitive rate available.