I was wondering if I set the custom permalink structure as /%category%/%postname%/ will it add the category to the listing as well? I mean will it change from /property-details/listing-title/ to /%category%/property-details/listing-title/ ?
Unfortunately, no, this will be applied to posts that are in the blog, in the custom post types slug the one that can be changed and the title will also be displayed.
This is exactly what I wanted to achieve in the first place. Is this the expected behavior, and is this approach correct? Or could it potentially harm my website or SEO?
No, everything should be fine with SEO. But please note that the category block is made as “decorative” for the purpose of permalinks, if this suits you, then there should be no other issues.