Investing in Property in South Africa

The South African property market is undergoing dynamic change. Increasing interest rates are reducing the disposable income of South African buyers, and the National Credit Act is limiting the number of home loans that are being approved. Still, when investing in property in South Africa, there are huge profits to be made if you follow the right investment strategy.
Property investors can make their real estate assets work for them in various ways.

Property as a primary dwelling or holiday home

There is equity in buying the home you live in. Usually, property appreciates over time, the mortgage balance decreases and equity builds.

Property as a short-term investment

This is often referred to as the buy-and-flip investment model as you buy the property to resell within a short period. You may decide to buy a home straight off the plan or invest in a fixer-upper.

Property as a long-term investment

This investment model, known as the buy-and-hold investment model, includes buy-to-let purchases and fractional ownership, which is the joint ownership of an asset. Buy-to-let purchases are a long-term property investment in which rental income is earned. In South Africa, leisure property has outperformed residential property over the last twenty years. Fractional ownership is one of the most effective, low-risk ways of investing in this booming market.

Trends in South African house prices

It is important to understand the market in which you wish to invest. In 2007, the growth of house prices varied from 9.9% in the Northern Cape to 21.7% in Limpopo. Factors that influence housing prices from one region to the next include the following:

• Regional economic structures, for example, city growth and developments
• Living standards and conditions, such as household income
• Physical location of properties, which is either coastal, rural, inland, or metropolitan

Despite the downward trends in housing sales, beach property, such as Hout Bay and Llandudno, have still achieved phenomenal growth in 2007. When reselling beach property, it can be marketed as a primary dwelling or a holiday home, which increases the resale potential.