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.