Currently, South Africa is in a slump phase, with the Western Cape in the early part of the recovery phase.
The main drivers of the market are:
1. Broad economic conditions
2. Stability of governance and economic outlook
3. Supply and demand
Last month, we covered above points 1 and 2.
As interest rates decrease and South Africa becomes more politically stable, the property market will improve.
Now, let’s focus on supply and demand:
South Africa has a severe housing shortage, with over 10 million people in informal settlements. The country also has the highest unemployment rate at over 32%. Many who are employed in informal sectors can’t access home loans, limiting their ability to buy property.
Demand is driven by both willingness and ability to pay. Without the means, need doesn’t translate to demand.
Investment implications:
1. There’s a large market for rental properties at the lower end, but these tenants are high-risk with potential for non-payment.
2. Rental and sales price growth depends on what tenants or buyers can afford.
To maximize opportunities:
1. Property Investment:
1.1. Focus on properties under R2 million in sectional title:
- smaller units in prime areas
- look for blocks where short term letting is allowed
- 2-bed units in growing areas with good security and amenities.
1.2. For free-standing dwellings, target properties under R3 million:
- near good schools
- central locations
- low crime rates
- quality infrastructure
- ideally with income potential.
2. Existing Portfolio:
- Generate additional cash flow.
- Be strategic with renovations.
- Keep vacancies low.
- Add rental units.
- Consider professional property management.
I hope this brief insight into the property market was valuable.
For assistance with any property needs, feel free to get in touch. 🙌🏻🤝🏻
Yours in property.
Jacques Grove
Principal and Dreamer
