Buying a property

The advantages of investing in South African real estate

Real estate for generations, if not for centuries, has been considered as the ultimate safe and solid investment, yet it is all too often overlooked by investors seeking quick returns over the short term. “An interesting example of missed opportunities,” remarket Niel Cronje, CEO Engel & Völkers SA, “is that of diplomatic staff during the 70’s and 80’s. I believe one can learn substantially from such examples so that individuals as well as the South African economy can benefit.

Diplomats, explained Cronje, would be earning money in foreign currencies and generally benefit from accommodation provided by the embassy. “They would thus have disposable income which they could have invested in property in South Africa. In the first place, the exchange rate would have favoured them quite significantly. And then of course, there are the numerous advantages of investing in South Africa which we quote extensively to international clients who are showing mounting interest in investment properties here.

Among these benefits, especially compared to investing in similar properties overseas, are the South African landscape and weather, the relatively inexpensive but very comfortable lifestyle and the escalation of property prices which provide an excellent return on investment. “Of course such property would also provide an additional pension guarantee,” smiled Cronje. He added that South Africa’s particular geographic location, at some distance from the Middle East and problems in Iraq also served to make it attractive to investors.

However, he cautioned that one should ensure that investment is being made in the right development and the right location. “In some areas there is an over-supply of property such as land in golf estates which are built primarily for the ‘second home’ market. Investment-wise, it is not guaranteed such a quick return, and investors are finding that many of these units thus take longer to rent out. Obviously buying property as one’s personal and permanent residence puts a different perspective on it. One should, however, be cautious about investing in just any new, impressive looking development. One should investigate how many tenants can be absorbed in a specific market, and of course ensure that the real estate agent is reputable and backed by substantial national and preferably international resources.”

Engel & Völkers currently has 18 offices in South Africa and deals in the upper end of the market, with exclusive investment property. “South Africa is currently one of the most favourable markets for investment property,” continued Cronje. “The exchange rate is advantageous, the cost of properties low compared to real estate overseas and the returns are excellent. In fact, we are finding that many embassies, diplomats and businesspeople are investing in property while renting a second residence at a very reasonable price. The returns they are making on their investment enables them to invest further in other ventures. In some areas, returns are doubled and tripled within a few years.

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