In a recent discussion on CNBC Africa, Keillen Ndlovu, an independent property analyst, provided insightful commentary on the current state and future outlook of South Africa’s property sector. Following a year of remarkable performance in 2024, where the sector delivered nearly 30% returns, Ndlovu highlighted how the first half of 2025 has seen a continuation of positive trends, albeit at a more modest pace of 6% total return. The backdrop of 2024’s extraordinary returns was discussed as a high bar for the current year. Despite this challenge, the property sector has maintained a steady upward trajectory. A significant shift has been observed in the earnings outlook for companies within the sector. Last year, earnings saw a decline of about 4%, but in 2025, the sector has bounced back, boasting an expected earnings growth of 4 to 5% across the board. Some companies, like Attack, are projecting even more substantial growth, with forecasts between 24 to 27%. Breaking down the sector's performance, Ndlovu highlighted a noteworthy recovery in the office segment, which was one of the hardest hit during the COVID era. Office vacancies have decreased from a peak of 18% to 13.3%, signaling a more stable market environment. In contrast, the retail sector continues to perform strongly, with major retailers such as Dis-Chem, Checkers, Boxer, and Pep seeking to expand their spaces. The industrial sector remains a standout performer, maintaining low vacancy rates of 2 to 3%. Analyzing the financial health of the sector, balance sheets appear robust, with loan-to-value ratios improved from a high of 44% to approximately 37%. Despite a calmer M&A climate this year compared to 2024’s active scene marked by almost 13 billion rand in equity raised, the market remains stable. Ndlovu noted that the only major expected activity involves mass real estate and Hyprop Investments. The dialogue also touched on broader economic influences. Ndlovu mentioned the impact of potentially lowering interest rates by 100 basis points, with anticipation of another 25 basis point cut, which could further stabilize the economic landscape. However, he noted that the property sector’s momentum may slow down without significant M&A activity to propel growth. Discussing political factors, Ndlovu emphasized the importance of a stable government in maintaining market confidence and encouraging investment. He drew an analogy, likening the government of national unity to a ‘loveless marriage,’ where internal quarrels present risks to market stability. One promising development highlighted was in the structural weighting of property in investment indices. An increasing allocation to property within indexes and balanced funds suggests that fund managers, even those traditionally underweight in property, are likely adjusting their strategies to include more property assets, substantiating the sector's growing significance. Looking into the future, Ndlovu estimated total returns for 2025 to hover between 10 to 12%, depending on the interest rate environment. This forecast, poised against an inflation rate hovering around 3.5%, positions property as a competitive investment offering in comparison to other asset classes like equities and bonds. This potential for high returns, combined with a stable income yield of 8-9%, affirms the sector’s attractiveness to investors. In conclusion, while 2025 carries over some challenges from the previous year, the outlook remains optimistic. Stability in macroeconomic factors and resilient sector fundamentals will be key to realizing the predicted gains and maintaining South Africa’s property sector as a robust investment domain.