- For property investment to be lucrative, the investor needs to be aware of current market trends.
- The work-from-home lifestyle means larger homes are in higher demand, and there’s been a semigration to coastal areas.
- Property investors should also be aware that the national vacancy rate is dropping, making buy-to-let a solid investment.
Property is traditionally considered a solid and safe investment compared to stocks, and that remains the case in South Africa regardless of the impact of COVID. What should investors know about the property market?
Note If you’re interested in investing, our Home Loan Calculators can help you determine your expenses so you can weigh cost versus estimated returns. For example, our Bond Calculator will determine the home loan you’ll qualify for, while our Transfer Cost Calculator tells you what you’ll pay for transfer and bond registration.
Property market trends: Why it’s a good time to invest
Although you’d think the economic impact of the lockdown would make people reluctant to dip into their wallets, the pandemic has actually stimulated property demand in some areas.
- Larger homes: More people have adopted the work-from-home lifestyle, resulting in a demand for more expansive living environments as people spend more time at home.
- Semigration: In addition to seeking larger homes, more homebuyers are looking for properties in scenic, peaceful areas. Semigration to coastal areas is an especially prominent trend.
- Sectional title properties have become more appealing as homebuyers look for security and a sense of community.
Those who look to take advantage of the current trends will find a property to be a lucrative investment indeed.
Note that an estate agent can be an invaluable resource for understanding current property trends before making an investment.
How to profit from property investment
- Buy-to-let is the bread and butter of property investment, allowing investors to generate monthly income. The rental market has experienced gradual growth in the wake of the lockdowns, and the national vacancy rate has dropped from 13.31% to 8.26%, according to the TPN Vacancy Survey.
- Capital growth refers to an increase in property value over time. Properties can increase in value as a result of fluctuations in the market, and you can also improve their value through renovations.
What types of property to invest in?
It helps to know what types of property are doing well.
For example, commercial property is currently a more profitable investment than residential. The Capex rate in South Africa is currently +11% for commercial properties, versus 5-8% for residential properties property.
The types of commercial properties are:
- Retail buildings.
- Industrial buildings.
- Office complexes.
According to an FNB Commercial Property Broker Survey for the third quarter of 2021, warehouse and industrial properties reported the highest level of activity. Industrial services can’t close down during a pandemic.
However, retail and office complexes may become more lucrative as people gradually return to work.
As of March 2023, the repo rate is 7.75% and the prime interest rate is 11.25%.
Interest rates were at their lowest point in decades during the pandemic as the South African Reserve Bank sought to stimulate the economy. However, they have passed a succession of interest rate hikes since then to combat inflation.
While experts predict that we will soon see an end to the constant increases, the trend is up and it’s best to get involved in the property market before interest rates rise much higher.
Prequalification will help you determine what you can afford on your investment. This is useful information to have before entering the market.
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