Local market knowledge is key as investor confidence takes a hit

Investor confidence has fallen back a little since Q1. According to the latest Absa Homeowner Sentiment Index, investor sentiment dropped to 80% in Q2 2026 from last quarter’s record high of 87%.  

Investors still see property as a good source of long-term returns. Among respondents, 48% said they believed property would deliver a good return on investment, while another 46% viewed it as a source of passive income. A further 40% cited strong rental demand as a reason to invest.

However, only 37% agreed that now is a good time to invest. While growth and arrears figures still look strong, rising interest rates and inflation mean that real-terms returns are falling, while the cost of investing is rising.

Strong demand for rental properties

Rental demand remains healthy across much of the country.

In PayProp's latest State of the Rental Industry survey, 43% of rental professionals reported having fewer vacant properties than usual, while 39% said they were filling vacancies in under two weeks.

For investors, that's a positive sign. Consistent rental demand can help reduce vacancy periods and provide a more reliable income stream, complementing any capital growth achieved when a property is eventually sold.

Not all provinces perform equally

While national figures paint a positive picture, successful property investing requires a closer look at local markets.

The Western Cape continues to lead the country in rental performance. The province has recorded above-average rental growth since the start of 2024, with annual growth reaching 9.7% in Q2 2026.

Limpopo has been one of the country's strongest-performing rental markets recently, but fell behind the national average in Q2 with growth of 4.1%. The province has experienced some of South Africa's strongest house price growth over the past year, potentially offering investors a good combination of rental and capital growth, but return on investment is now declining.  

Meanwhile, KwaZulu-Natal and Gauteng, SA’s two biggest rental markets, have experienced relatively slow growth this year.

Investors should keep an eye on risk

Property investment is not without challenges in the second half of 2026.

Economic growth remains modest, inflation is rising, and recent interest rate increases are putting additional pressure on both landlords and tenants. Higher borrowing costs increase the expense of property ownership, while stretched household budgets can increase the risk of rent arrears.  

For investors, that makes local market expertise more important than ever. Understanding rental demand, pricing trends and tenant risk at a neighbourhood level can have a significant impact on long-term returns.

While property continues to offer attractive opportunities, the latest market data suggests that success will depend less on broad national trends and more on choosing the right property, in the right location, with the right tenant.