The State of the South African Property Market

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The State of the South African Property Market

Cape Town Property in front of Mountain January 2016

Those of you who are yet to see the latest film about the property market, The Big Short, might find that its subject matter is still fresh in your memories.  The film looks at the events which triggered the US’s recession in 2008, which saw the country’s economy join the global recession.  The reason that this is important is that the market has been coming back from that trough for around 8 years, making it a great scale by which to judge property growth.  But, with an economy of $99.5 billion compared to the US’s $2.45 trillion, South Africa is merrily registering higher growth rates than the US.

At the end of 2015 it was registered that South Africa’s property growth rate was higher than that of the US (as well as India, Mexico, Russia, Britain, and Canada).  Over the course of a year, South Africa’s house prices increased 7.3 percent as opposed to the US’s 4.7.  What is interesting is that, since the first quarter of 2012, South Africa and the US have both registered a growth of about 30 percent.  This means our post-recession growth is simply stronger.

What this Property Price Increase Means for Home Owners

This is not ideal for new homeowners as it means bigger bonds in a time of financial uncertainty.  The economic conditions have been pointing towards inflation, which could trigger another recession.  However, South Africa’s economy is set to rise in 2016, not fall, meaning that we will escape another recession.  Ultimately this means that bond repayments should still be manageable for home owners in 2016.

What this Property Price Increase Means for Investors

International investors absolutely love the South African property market at the moment.  With the rand currently experiencing an unprecedented low, prices here are becoming ever more attractive to investors from greater economies.  And, with Africa registering an 89 percent growth potential in wealth, investors are looking to the only two African cities to feature in the top 100 of the Prime International Residential Index.  These cities are Johannesburg and Cape Town.

In essence, investing in South African property gives international investors better assets.  Cape Town and Monaco have similar features, but $1 million will buy investors 17 square metres in Monaco yet buy them 204 square metres in Cape Town.

The fact that South Africa has been singled out by international investors presents great opportunities for local investors.  With property data indicating that the market is set experience continued, steady growth, South African investors can be fairly sure that the market will issue good returns in future.

Image credit: http://www.knightfrank.co.za/cape-town-property

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