Investing in South Africa: market sink or soar?

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Grant Smee | Founder | EPiC Networking South Africa | mail me |


A bout of recent heavy power outages had both South Africans and foreign investors rethinking their investments on home soil. While the economic instability has been felt predominately by the business sector, much hesitation has been experienced in the property sector too. 

Recent indications as per media reports show that South Africans (in particular) are cautious to invest because of the lack of necessary infrastructure for their investment/s to thrive.

It’s not all bad news and says that 2020 is the ideal year for investment in the property sector. President Ramaphosa places great emphasis on the country’s infrastructure which is set to begin its slow journey to improvement this year.

Based on this, we will see improved stability in both the commercial and residential property sectors.

Property market stability 

While some investors may choose to play the stock market rather than invest in property, the latter option is far more attractive for the risk averse.

Despite what some may say, our property market has continued to maintain a balanced global position with steady returns.

Accommodation seeking professionals

As many young South Africans continue to enter the skilled labour market and seek to move out of the family home, they are met with a demographic-specific property shortage.

Young professionals are driving the affordable housing market nationwide, and due to their preference for ‘lock-up-and-go’ units, they are the property developers dream.

High rental rates

On a similar note to the previous point, cash-strapped millennials are increasingly choosing to rent rather than buy in the South African property market.

This is good news for property investors! Buying-to-let helps you to pay off the bond while the value of the property continues to increase over time – particularly in desirable locations.

Infrastructure 

Despite what the naysayers may say, our roads, transport hubs and other infrastructure are superior to some of our neighbouring countries like Mozambique or Botswana.

South Africa has direct access to the world’s major economies, and most of the world’s biggest companies have branches here. I note that this economic positioning has led to an increase in foreign workers seeking accommodation in the country.

Tourism

South Africa is consistently included in the top holiday destinations in the world, and this combined with a good exchange rate has led to some tourists wishing to make their connection more permanent.

The influx of tourists has led to an increase in short-term rental opportunities for property investors, often at more attractive rates than those offered by local renters.

Property prices

Government is taking the necessary steps towards ensuring that South Africa is as attractive as possible to foreign investors.

These steps directly benefit local property investors too. It’s definitely a buyer’s market at the moment. A lull in the housing market means that many homes are on the market for far less than initially purchased for, which is great news for first-time investors.

Lenient loan lending criteria

Finally, one of the most compelling reasons to invest in the South African property market in 2020 is that mortgage lending experts have observed a recent uptick in banks adopting more lenient lending criteria for potential buyers.

From an increase in conversion and approval rates to requiring smaller deposits, this trend is really benefiting first-time buyers.


 

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