Why multifamily properties are shaping the future of South Africa's real estate market
Image: Supplied
South Africa's large-scale residential rental property market, commonly called 'multifamily', is quickly emerging as a promising segment of the country's real estate sector.
Amelia Dieperink, the head of Commercial Property Finance (CPF), Affordable Housing, Absa CIB, said this was backed by competitive financial returns and reduced volatility, all while addressing a critical housing shortage.
She said multifamily presents a compelling investment case.
'The multifamily offering has gained momentum, buoyed by the increasing demand for affordable, centrally located and well-managed rental housing. Institutional investors are taking note. Statistics South Africa reports that 4.5 million households, or 23% of the national population, are currently renting.
"Of these, 15% (around 685,000 households) reside in blocks of apartments, pointing to a significant opportunity for scale within the multifamily sector. Multifamily housing refers to institutional ownership and professional management of apartment buildings and residential portfolios.
"This model is fast becoming the global standard for urban housing delivery. According to the Centre for Affordable Housing Finance(CAHF) in Africa's recent report, Aligned Interests: The Case for Long-Term Institutional Investment in Multifamily Rental in South Africa, the sector is increasingly robust, demonstrably resilient, and qualitatively rewarding,' Dieperink said.
The head said, despite challenges, ranging from service delivery to economic strain, developers have remained committed to delivering quality, well-managed housing with attractive amenities in desirable locations.
She said the multifamily model has proven itself to be low risk and defensive in nature when well managed by strong operators, as well as adaptable and responsive, bolstered by innovation in property management and a surge of interest from both local and international players.
'The residential property market is a major contributor to the South African economy, playing a pivotal role in supporting growth, job creation, and meeting the evolving housing needs of a diversifying population,' notes the CAHF report.
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For the sector to realise its full potential, Dieperink said, process and structural inefficiencies must be addressed and capital unlocked. She said institutional players, lenders, and policymakers must collaborate to accelerate delivery, scale developments, and enhance regulatory support.
Absa CPF said it has been instrumental in supporting the rise of multifamily developments, especially within the affordable housing segment. Over the past decade, it said it has focused on this high-growth area, providing financing solutions to investors and developers across the country while also enabling the transformation of urban centres such as Johannesburg's CBD.
Here, obsolete office buildings have been revitalised into thriving, community-based residential spaces, it said.
'The social impact of this investment cannot be overstated. Beyond providing homes, these developments stimulate economic activity, improve safety, and bring dignity back to neglected urban spaces.'
Absa added that it has also led the way in embedding sustainability within property finance. In 2023, the bank concluded a R4.5 billion transaction with the International Finance Corporation under the Market Accelerator for Green Construction (MAGC), the first in size of its kind in Africa.
More than half of this funding was allocated to affordable housing projects, cementing Absa's position at the intersection of environmental and social impact. Yet, the bank said, despite the sector's momentum, one of its most pressing challenges remains the availability of data.
'Comprehensive, granular, and reliable data specific to the multifamily rental market is lacking. Investment-grade decisions depend on transparency, and for many institutional investors, the absence of detailed analytics has been a key barrier.'
Recognising this, Absa said it sponsored the original MSCI compilation of residential sector data in 2018.
More recently, alongside Divercity Urban Property Group, the bank co-funded two critical research studies commissioned by the South African Multifamily Residential Rental Association (SAMRRA), an emerging industry body representing thirteen major players who collectively own and operate over 75,000 units valued at over R40 billion.
That figure alone represents 11% of the entire multifamily market.
Dieperink said as investor sentiment shifts and appetite builds, the focus must now be on scalability. She said that with institutions such as the Public Investment Corporation(PIC) committing capital and financial institutions such as Absa providing finance, the growing imperative shifts to the increase in delivery of quality housing stock.
'Unlocking scale will further facilitate a residential-focused listed REIT structure, improving access to capital while offering the broader investment community a new vehicle for inclusive, impact-driven growth.
"South Africa's multifamily rental sector stands at a defining moment. With the right blend of capital, data, and policy support, it has the potential to reshape the country's housing market and, in doing so, drive a broader economic and social transformation,' Dieperink said.
According to Mordor Intelligence's South Africa Real Estate Market Analysis, the rental market continues to demonstrate resilience and attractive returns for investors, with gross rental yields in major metropolitan areas like Johannesburg ranging from 6.5% to 9.3%.
The report said this robust rental market is particularly evident in urban centres where young professionals and students drive demand for rental properties.
'The market has seen a significant shift in rental preferences, with increased demand for properties offering modern amenities, security features, and proximity to business districts. Property investors are increasingly focusing on developing rental properties that cater to these evolving tenant preferences while maintaining competitive pricing strategies,' reads the analysis.
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