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Ten reasons to invest in property in South Africa

1. Property investment offers relative stability

Investing in the stock market can often bring forth great returns, but it is also very unstable and there is always a possibility that you will lose a lot of your capital. Experts advise that you balance your investment portfolio by choosing a relatively stable option and in South Africa, the property market is just one of these options.

Property Investment: The Ultimate Business
2. Property shortage in South Africa

The country’s turbulent political past has left South Africa with a shortage of good housing and the government has made solving the problem a high priority. This focus on housing will result in a long-term structural growth potential within the South African property market, with people migrating to better neighbourhoods and more expensive homes set to continue for a long time to come.

3. Property cycles in South Africa

Many people dream of having their own property and the added sense of security and comfort of a continuously growing asset that goes with it. When young people leave school and first enter the working world, they enter the property cycle through renting a flat then buying one, selling it off and then buying a small house or townhouse. Over the years, they will become more financially secure and then will be able to invest in their dream property, which they are likely to sell once they reach retirement in order to move back into a smaller house or townhouse. The high demand for property in South Africa means that an astute investor benefits throughout the property cycle, as any investment is bound to provide high returns.

4. Stable vs unstable world

With the effects of 9/11 echoing throughout the globe, everyone has now become aware of how extremist attacks can have a profoundly negative effect on the economies and stock markets of the countries affected. Terrorism is a decidedly global problem, but when it comes to South Africa, experts are of the opinion that the country remains one of the least affected by extremist activities. This balanced position is proving the catalyst for property investment interest from abroad. The increase in foreign investment is certainly stimulating an already active economy.

5. High property rentals rate

A series of interest rate hikes and escalating inflation has caused an escalation in the number of people choosing to rent rather than buy property in South Africa. This means that the buy-to-let market is becoming an increasingly popular property investment option around the country, particularly in the bigger cities. Renting a property out will also help you to pay off your bond, while the value of the home steadily increases.

6. Top holiday destination in the world

The fact that holidaymakers put South Africa near the top of the list when it comes to prime holiday destinations means that the country is home to a picturesque landscape, both diverse and naturally beautiful. There is a location to suit any taste, from azure blue sea and sandy white beaches, to lush green winelands set in the mountains, extensive nature reserves and game parks with an abundance of wildlife that boasts the sought after Big Five and hundreds of bird species, as well as the ultimate whale watching and shark diving experiences. With so many visitors flocking to South African shores to take advantage of the excellent climate and endless natural beauty, who wouldn’t want to make this country their home?

7. Favourable exchange rate

If you are earning pounds, dollars or euros then you are leap years ahead of locals when it comes to the affordability of property in South Africa. More and more foreigners are seeing South Africa as the ideal property investment location, particularly in light of the favourable exchange rate, as well as the fact that the economy is the second strongest on the African continent. Even if you’re a local and don’t earn foreign currency, the fact that South Africa has such a strong economy means that you are guaranteed to yield excellent long term returns on your investment.

8. No tax on property purchases

The good news is that there is no VAT payable on property purchases in South Africa. However, the seller is generally liable for agent’s fees that incur a percentage of VAT. There is also no stamp duty on property purchases in this country, which means that buyers are sure to enjoy the added benefits. Another drawcard for the country as a prime investment location is the fact that there is no inheritance tax on property.

9. Tax breaks on property development

Real estate developers are given tax breaks of up to 20%, while another 20% tax break on rental is available for renovation projects. Consequently, the commercial property market in South Africa is currently outperforming markets in many Western countries. Even with the global economy experiencing difficulties, the commercial property development market in South Africa is booming.

10. High growth potential

It has already been said that the shortage of housing in South Africa and the government’s high priority to alleviate this problem means that the country has a high growth potential. The growth is also due to the development of a strong middle class, which is providing an increase in the demand for homes. In terms of facts and figures, the housing market in the Western Cape is showing a steady growth of 13.9%, while other metropolitan areas are growing at an annual rate of 15.6%. As we all know, a steadily increasing demand translates into high returns on a long term investment basis.

13 Comments

  • Robert StevensonReply

    My property investment is now of less value than it was 5 or so years ago, with the unstable Government I fail to see how it could be a good investment. It would be interesting getting more than one view on this subject eg. from investment houses as well.

  • IGrow Wealth InvestmentsReply

    Hi Robert, where is your Investment Property located? Do you have tenants currently in the property and is your property managed by yourself or a agency? Property is always on high demand in SA and is a great vehicle to financial freedom, we can arrange a free Property Investment Consultation where we would evaluate your particular situation and how we can make strategic changes for you to see beneficial results, alternatively read through some of our blog articles and training videos to gain more insight and educate yourself to make an informed and actionable decision. Thanks for the question – to your success.

  • IGrow Wealth InvestmentsReply

    Hi Robert, where is your Investment Property located? Do you have tenants currently in the property and is your property managed by yourself or a agency? Property is always on high demand in SA and is a great vehicle to financial freedom, we can arrange a free Property Investment Consultation where we would evaluate your particular situation and how we can make strategic changes for you to see beneficial results, alternatively read through some of our blog articles and training videos to gain more insight and educate yourself to make an informed and actionable decision. Thanks for the question – to your success.

  • Robert StevensonReply

    IGrow Wealth Investments My property is my own that I was talking about (still owe R5000 or so). I was going to by 3 or 4 town houses to rent out. I decided to invest rather to be safe, as one does not know what new rules will be applied to multiple properties. If SA carries on this route I would virtually have to give my existing property away if I decide it is no longer safe or wise to stay in SA (Sad thought as this is my land of birth and I love it dearly, but not the government). Sorry if I come across negative, I try to be as positive as possible. Kind regards.

  • David CollinsReply

    Reading a generalized report on the benefits of real estate and then comparing that with a singular experience is an apples vs oranges scenario. RE isn't fail safe, the importance of a wise and knowledgeable purchase cannot be overestimated. Still factors beyond our individual control do come into play. The global recession hammered RE values around the world and that may be a big factor in Robert's situation. Despite the recession the return on RE investments has historically been very good.

  • Klaus RodemannReply

    I do not think that property is a safe investment. Municipal rates and taxes, water and light charges put bond repayments out of reach for the average person. Besides it is uncertain if property will not be treated as in Zimbabwe

  • Ian JayesReply

    But you have to discount Julius Malema the EFF and the SACP who love to redistribute or seize other people's wealth.

  • Kathleen Howson MarshallReply

    There is NOT a property shortage, there is a developed property shortage. Building costs are high. Its NOT advisable to invest in property in South Africa due to the current governments policies. Especially with obvious corruption and non-accountability.

  • Michael MullerReply

    There will always be the nay-sayers. I am no great fan of residential property as an investment, but retail and commercial property, properly selected and qualified… absolute must. Regardless of the economy, people spend money, and they spend it in malls.

  • Al Stanford-SmythReply

    Durban Municipality is now a low unto them selves. Water and light charges exceed the excepted going rate for a service that at best is a random service or no service at all on some days. From 1972 to date at the same address I have never been so disappointed in there arrogance and greed with open ended electronic fraud for water of R36209.48 for so called back dating of your water bill. You do not know how fare thy will back date your bill with out giving you notice.For if and when thy need more money. To fill there ever growing list of corruption needs now the same tap water in the same pipes are being given different profiles price ratings to different house holds to pay. I have asked them for a list of there different pay rats if you are a bed and breakfast one rate if you are sick another rate if you are black another rate if you are wight another rate and the list can go on.The price of water must be the same for all South Africans.
    If thy do not retract this electronic fraud for water for December I am and have instructed my wife a Attorney to lay charges against them. I now have tide them into a number of false statements and a false paper trails of fraud against me and my family assets a block of flats in Durban. If you are part of the middle class you will be raped and strangled by your governments service provider the Municipality for your extra left over money. I have asked them to respond to there fraud and have to date no reaction from them. Of course thy can not explain away there own false paper trail to profile me or my family as something I am not. To rob me of my money and states in SA. To ignore my family's states to work from home or my certified government gazetted files from 1985 from there very own office to my mom to trade on the rental market. I know thy can not be trusted with your vote we need a change in SA a change off governance…..Al

  • Molf PilaneReply

    Since 1994 the Black middle class in SA has grown from an estimate 1.9 million in 1994 to 5.9 million in 2010, i'm not an economist but it means this mean more residential properties, consumer goods, cars, etc have been bought by mainly this class, being Black professional in Finance and a graduate who recently brought property, car and filled my house with all consumer/ luxury goods in a new residential development property area in Midrand it goes to say that we have a class that is optimistic and inspite of all the negatives from politicians this class have carried the fragile SA economy and has contributed to the growth that we have witnessed over the past 2 decades, as they say " the grass is always greener on the other side" , we do enjoy relative stability compared to many countries facing threats of organised terrorism, crime, repression by the State, etc if we were such a bad country why is someone still investing in this economy, why are we not having a mass exodus of both black and whites, etc ???? Do we really face problems in this country that cannot be resolved???

  • Molf PilaneReply

    Since 1994 the Black middle class in SA has grown from an estimate 1.9 million in 1994 to 5.9 million in 2010, i'm not an economist but it means this mean more residential properties, consumer goods, cars, etc have been bought by mainly this class, being Black professional in Finance and a graduate who recently brought property, car and filled my house with all consumer/ luxury goods in a new residential development property area in Midrand it goes to say that we have a class that is optimistic and inspite of all the negatives from politicians this class have carried the fragile SA economy and has contributed to the growth that we have witnessed over the past 2 decades, as they say " the grass is always greener on the other side" , we do enjoy relative stability compared to many countries facing threats of organised terrorism, crime, repression by the State, etc if we were such a bad country why is someone still investing in this economy, why are we not having a mass exodus of both black and whites, etc ???? Do we really face problems in this country that cannot be resolved???

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