News Research

The State of SA’s Property Market Q3 2022

South Africa’s property sector, like many others, continues to be negatively affected by increased concerns about global and local economic growth due to higher inflation and interest rates, says Rode’s Report on the State of South Africa’s Property Market Q3 2022.

With reference to the world economy, the International Monetary Fund (IMF) recently warned that “the worst is yet to come, for many people, 2023 will feel like a recession”.


The office market continues to be in the worst position of the three major commercial types due to a severe oversupply. However, the results of the latest Rode survey show that green shoots are reappearing in the market as vacancy rates improved during Q3 2022, while nominal rental growth turned positive. This is further illustrated by Rode’s capitalisation rates declining from high levels. In other words, fundamentals are poor but improving somewhat.

Nationally, gross market rentals for decentralized grade-A space increased by 2% in nominal terms during Q3 2022 when compared to Q3 2021, the first year-on-year increase in two years. This increase comes from a very low base as the Q3 level of 2021 was the lowest during the pandemic. Nonetheless, the market has been boosted by the return of workers to offices with Covid-19 becoming less of an issue. However, there is one caveat: the above rentals are nominal rents, meaning no rental remissions, tenant installation allowances or a number of months rent-free are assumed i.e., ‘façade rentals’ as it is not certain what is happening behind this wall.

In real terms, rentals fell by a hefty 8% after deducting building cost inflation (BER BCI) which stood at just above 10%. Regionally, Cape Town looks to be turning over a new leaf, but it is important to note that rentals are edging up in Johannesburg and Durban. Rentals for all of the major cities are still lower than pre-pandemic levels.

During Q3 2022, grade-A nominal rentals increased by 7.6% in Cape Town, decentralized compared to Q3 2021, increased by 3.8% in Johannesburg and 1% in Durban. Pretoria bucked the trend, with rentals down 3.3%, implying that no major city managed to record above-inflation rental growth compared to a year earlier. With the 11% rise in building costs, real rentals are still deep in negative territory, apart from those in Cape Town.


The industrial property market continues to be the ‘cream of the crop’ due to its superior rental growth and low vacancies. Nominal rental growth for space of 500m2 rose by 5.3% during Q3 2022 when compared with Q3 2021. The market has been boosted by continued low vacancies, especially for warehouses linked to logistics, which stems from the strong online retail sales market. This growth compares to the 5.4% during Q2 2022, which implies a slight cooling in the accelerating trend observed since the middle of 2021. Looking at the year so far, rental growth has averaged 5.1%, well up from the 2.2% for the whole of 2021. However, the story is not so rosy in real terms as building cost inflation (BER BCI) is still elevated at approximately 11%.

Regionally, Cape Town is looking as ‘fresh as a daisy’ with nominal industrial rentals for prime space of 500m2 up by 6.7% year-on-year during Q3 2022, remaining above pre-pandemic levels as the demand for space exceeds supply. This was the strongest rental growth of the major industrial conurbations, despite growth slowing somewhat from the 7.2% during Q2 2022.

Cape Town’s industrial vacancy rate also declined further. Nominal rentals in Durban and the Central Witwatersrand also continue to perform well, with growth of 4.6% and 4.4% respectively, albeit cooling slightly from Q2. Fundamentals in Durban are looking better as the July 2021 looting and floods in 2022 have created a shortage of space in some areas with its vacancy rate declining to just under 4%, better than the national average. Interestingly, rental growth picked up to 3.9% in the East Rand from 2.4% during Q2 after averaging about 1% in 2020 and 2021. Vacancies remain the highest in the West Rand, Gqeberha and Bloemfontein at between 5% and 10%.


The housing market continues to slow as expected, with nominal prices growing by 3.3% during Q3 2022 compared to Q3 2021, based on FNB data. This is down from the 3.8% growth recorded in Q2 as the higher cost of living and rising interest rates eat into demand. This brings growth to 3.7% over the first nine months, marginally slower than 4.2% for the full 2021, implying that house prices are still declining sharply in real terms with the consumer price inflation (CPI) rate averaging 6.6% so far in 2022. At this stage, the impact of the interest rate hike is only having a marginal effect on prices and volumes, as these remain relatively low by historical standards, while banks are also competing for home loans, by for instance, reducing deposit requirements.

Regionally, activity in the Western Cape was perceived to be the strongest of the major provinces, but it has also slowed. Turning to flats, vacancy rates in South Africa averaged 7.8% during Q3 2022, down from 8.8% in Q2 2022 according to Rode’s residential survey data. This means vacancy rates continue to improve after hitting a peak of 13% during Q4 2020. The improvement in vacancy rates has led to better performing nominal rentals, but rental growth is not shooting out the lights which suggests that property owners have generally tried to keep rental increases low to reduce vacancies.

Regionally, Cape Town’s flat vacancy rate fell to 4%, to the surprise of Rode. All in all, house prices and rentals are still declining in real terms in most parts of the  country