Is real estate a good investment in South Africa?

8 October 2020

In spite of –or perhaps due to- the COVID global crisis, the real estate market is making heads turn and attracting diverse demographics: from millennials looking to buy their first home to extended families looking for bigger properties, and even expatriates considering the buy-to-let investing strategy.
Is this the right moment to buy?
Here are the facts:
•     Unprecedented interest cuts - As a response to the coronavirus damage to the economy, on March 2020 the South African Reserve Bank (SARB) cut the interest rate by 1%. Another 1% was cut by mid-April, followed by an additional 0.5% in May and another 0.5% in July. As a result, there is currently a prime 7% interest rate, the lowest in over 50 years.
•     A buyers’ market- There is an oversupply of housing in South Africa, with new developments being built all over and older houses entering the real state agencies’ listings every day.
•     Available financing – Buying a house now is more affordable than ever before. There is a number of properties available for less than one million Rands, which value exempts the buyer from paying transfer duties. Also, there is government support for first-time homebuyers, designed to help medium to low-income earners. Furthermore, South African banks are approving more loans consisting of 100% of the value of a house; which means the buyer can get a mortgage with zero deposit.

Where to start?
The value of a house can vary widely due to location. Experts advise to start by choosing the most convenient area for you in terms of amenities, schools and work. However, this last factor could be compromised since more and more people are working from home as a consequence of the pandemic.
The most efficient way to find a house that ticks all your boxes is to use an experienced real state agent. There are many reasons to do so. First of all, agents know the market so they can find available homes before they are listed. They know the law and are ready to tackle the paperwork. Also, they compare home loans to find you the most convenient deal. Best of all, as a buyer, their services cost you nothing.
What about foreigners and non-residents?
Buying property in South Africa is quite appealing for foreigners due to favourable exchange rates. Most of the time, investors have money at hand to make a full purchase. However, and especially in these difficult times, foreigners can also apply for financing within South Africa. Major banks offer loans to non-South Africans within certain conditions. Usually, foreigners are asked to come up with 50% of the property value as a deposit (which can come as foreign funds from the native country). Then a local bank will be able to assist with the balance in the form of a loan. In this regard, it is always a good idea to be informed and comply with local legislation. Again, a real estate agent can help you with this matter.
In summary, the current state of the market and mortgage rates being the lowest in a long time, have unexpectedly generated an environment for investment in real estate. It is clear that the moment to buy is now.
Monica Munoz, KW Associate in association with The Diplomatic Society
Keller Williams Realty Clockwork
Contact +27(79) 872 3319  

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