Wouldn’t it be great to have that crystal ball – to be able to look into the future and identify the best investments to back? Whilst there is no such thing, we do have the ability to make informed decisions based on past experience and probable future scenarios.
Let’s look at the past. We know that the real estate market in the greater Cape Town area for the most part, recovered well after the global financial crisis (GFC) of 2008 – 2010. Take for example the Somerset West market. Whilst the volume of sales dropped in the GFC period, the values were only marginally down. By 2011 the values had recovered, and from 2011 -2016 the median freehold property price has increased by over 50% to R 2 559 000.
Now let’s consider the future prospects. Recent election results confirm that Cape Town residents are happy with the local governments’ progress and the way the city is managed. Nothing’s perfect, but no one will argue the fact we live in a city we can be proud of. That’s set to continue with another 5-year mandate being delivered at the polls last week.
That stability and consistency bodes well for the future. South Africans further north have seen this, resulting in thousands of families relocating to the greater Cape Town area over the past few years. All of this translates to increasing demand for property.
When you look at the Helderberg basin there is no doubt that there is significant property development. New shopping centers and schools only confirm the growth trends. With the increased demand and surrounding growth there is upwards pressure on house prices.
South Africans will feel the increased economic pressures brought on by inflation, increased interest rates, and increasing unemployment. These factors will most certainly slow down the property market country-wide, but we are anticipating that the Western Cape will be less impacted than other parts of the country.
If you’re looking to make an investment there aren’t many low-risk options. The Rand has been volatile, the stock market is always high-risk, and money in the bank simply doesn’t keep pace with inflation.
Taking your investment off-shore will reduce your risk on the depreciation of our currency, but getting it to work off-shore is another matter entirely. Interest rates returns are insignificant and without expert off-shore knowledge, you’d be taking a gamble.
So that leaves the local property market as a sound option to consider. The market is stable. Rental demand is high. There is an increasing demand for property from not only the increasing local population, but those relocating to the greater Cape Town area.
When you consider that SA banks still have a good appetite for home-loan lending that gives you the option of gearing your investment. These factors, combined with a strong track record, all point to local property investment as the wise choice for savvy investors.
Principal of Harcourts Platinum, and Director of Harcourts South Africa
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