Property is a key pillar to many successful investment portfolios and many people are looking to diversify their own investment portfolio by buying into the SA property market. So, what makes this market attractive?
- Positive political change: The politics of South Africa have always been turbulent, having a significant impact on the local and national economy. With the arrival of President Ramaphosa in the beginning of this year, many people feel that the stage is set for a stronger SA economy and a more stable political atmosphere. While this may take a while to make an impact, the indicators that reform is in the air certainly has made investors more interested in buying up residential and commercial property in SA for long-term benefits.
- Stable credit ratings: While South Africa is rated at junk status by international credit agencies, this rating has stayed stable so far through the year. Moody’s kept SA at investment grade, saying that despite the challenges faced by SA, the damage done to SA institutions would “gradually reverse under more transparent and predictable policy framework” put in place by President Ramaphosa. This cautious optimism has indicated to investors that now may be the right time to invest in order to optimise gains.
- Investing at the bottom of the property cycle: The property market, especially in Gauteng, has not been doing well in recent years, making it difficult for sellers to see a meaningful increase in the value of their property. However, for buyers this presents a good opportunity to get their foot in the door, especially for first-time investors. Unlike the Western Cape property market where high prices make it difficult to invest, Gauteng offers opportunities to get into good areas without breaking the bank. This is ideal for long-term investors rather than people who want to flip properties quickly.
- Positive GDP forecasts: Economic growth drives the property market, with more jobs creating a demand for more homes and driving up the price. While GDP growth was constricted in the first quarter of this year, the outlook is still positive with SA’s GDP growth predicted to hit 17 – 2% this year and positive growth expected through 2019 and 2020.
- Airbnb: Short-term rental solutions are a great means of earning income on your investment if you live in high-demand areas like tourist destinations or high-traffic business nodes. While short-term rentals are less reliable (your income can vary greatly from month-to-month), investors often report larger gains – especially in tourist areas over the summer months. In Cape Town alone, Airbnb welcomed almost 300,000 visitors, with hosts typically earning an average of R43,400 over 32 nights, boosting the city’s economy by R2.4 billion.
Jason Scholtz is the CEO at Envision Investments and a leader in the property and strategic investments industry in South Africa. For more investor tips and an insider’s look into the South African market, be sure to get in touch, keep an eye on this blog or visit http://www.envisioninvestments.co.za/