South Africa makes international headlines as a real estate investment hotspot
Affluent property buyers with around R15 million to spare will get more for their money if they invest in South Africa. According to the latest Wealth Report (2022) from global property consultancy Knight Frank, released yesterday, $1 million (R15 million) will buy you $220 million.2 prime real estate in South Africa; 10 times the size of what you could afford for the same price in Hong Kong. Monaco, where 15 million rand will only buy you 15 million2 prime real estate, in the most expensive city in the world for luxury properties.
“While not everyone can afford to spend R15m on an ultra-luxury home, we are seeing an increase in demand for bonds for homes in the middle to upper end of the market,” says Carl Coetzee , CEO of BetterBond. “While most of BetterBond’s approved bond applications are for homes up to R1 million, there has been an almost 44% increase in bond applications over R3 million. As interest rates begin to gradually rise, we expect buyers at the higher end of the market, less sensitive to price swings, to drive much of the buyer activity,” Coetzee says. Just over 6.6% of BetterBond grants for the 12 months ending January 2022 were for bonds over R3 million.
“The Knight Frank report also notes that despite the economic impact of the pandemic, there are still residential hotspots signaling strong signs of growth. Unsurprisingly, Constantia in Cape Town has been named as one of the regions in the world where the demand for larger properties with enough space to work from home is expected to drive up property prices by 25-30% over the past few years. next five years,” says Coetzee.
But it’s not just the high end of the South African property market that’s making international headlines, says Coetzee. A recent study by Compare The Market shows that South Africa has the most competitive bond to rental prices in the world. The difference between owning and renting a house of the same value is only 0.8%. “With such a small gap between renting and buying, the benefits of having an asset that appreciates in value over time means it makes more financial sense to own rather than rent a home,” says Coetzee. .
The Australian report estimates that South Africa’s average rent nationwide is around R12,851 and the average bond repayment is only R240 more at R13,091 per month. “Months of historically low interest rates, which saw the prime rate hold at 7% for more than a year, improved affordability for homeowners across all price brackets,” says Coetzee. “With this, more buyers have understood the value of buying rather than renting. As a result, BetterBond has seen an increase in buyer activity in recent months. BetterBond reported an 8.43% increase in bond registrations for the 12 months ending January 2022.
FNB reports that for the first nine months of 2021, the average size of mortgages approved was approximately 16% higher than in 2020, and the average property size was approximately 6% larger, compared to the same period in 2020. “BetterBond’s average approved bond size increased by 11.17% for the 12 months ending January 2022, with the average purchase price of a home increasing by nearly 11.5% says Coetzee.
“We expect bond activity to remain buoyant, despite the ETF’s expected repo rate increase of 100 basis points for the year,” Coetzee said. “Much of this will be driven by mid- to high-priced buyers who have access to credit and want to relocate to accommodate a work-from-home lifestyle. For these buyers, the benefits of owning instead of paying monthly rent will remain relevant. »