South Africa is the economic motor of the African continent and has what is arguably one of the most beautiful and diversified natural landscapes in the world, making it an attractive target for property investors.
But what are the specific reasons why the South African property market is such an attractive target for investors? Why is it such a great alternative to stock market investments?
The property market offers a greater stability than the stock market. Although the profits may not be as high, the risks are far lower. The chances of losing a large portion of your capital are much less with property.
The South African property market in particular has a relatively balanced global position and is less exposed to extremist actions than other regions in the world.
South Africa has a shortage of good housing, but the government has made addressing this problem a high priority. In time, this will lead to long term growth potential in the sector. Migration is also set to increase, adding to the demand for good quality housing.
Most people dream of owning their own home and begin by purchasing a small house or apartment. As families grow, they move to larger houses until retirement approaches, when they begin to look at selling up and downsizing to a smaller property again. This cycle leads to an ever present demand for all types of housing, providing opportunities and benefits to the property investor.
Top Holiday Destination
South Africa is a top global holiday destination, with travellers lured by the excellent climate, exotic wildlife and exciting landscapes. Holidaymakers need accommodation for their visits and after, these visitors make the country their new permanent homes after sampling the delights of the country.
The tourism rental and buying market offer opportunities to property investors.
South Africa has a relatively strong economy, the second strongest on the continent, even as a local, you can gain advantages from this strength to obtain excellent long term returns from property investments.
High Growth Potential
In addition to the government commitment to addressing the housing shortage in South Africa, the country has a high middle class development, driving an increasing demand for homes. The housing market across the country shows steady growth rates of up to 15%, particularly in metropolitan areas, which translates into excellent returns for potential property investors.
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.
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.