Staying informed about the latest trends in the South African real estate market is essential for investors.
Antonie Goosen, founder and principal of Meridian Realty says these trends offer valuable insights that can guide smart investment decisions in this ever-changing property landscape.
READ: 10 tips for first-time property buyers
Shift Towards Residential Properties
"With the COVID-19 pandemic, there has been an increased demand for residential properties as more people prioritize homeownership and larger living spaces," says Goosen. "The pandemic has accelerated this trend as more people seek larger living spaces, home offices, and outdoor areas. Suburbs in cities like Johannesburg, Pretoria, and Cape Town are seeing increased demand, with families and professionals looking for a better quality of life outside the bustling city centers."
Rise of Mixed-Use Developments:
Mixed-use developments are gaining popularity in South Africa. "Investors should pay attention to the growth of mixed-use developments. These projects combine residential, commercial, and retail spaces, creating self-sustaining communities. Areas like Sandton in Johannesburg and Century City in Cape Town are prime examples where such developments are thriving, offering convenient lifestyles and attracting a diverse range of tenants."
Increasing Demand for Sustainable Properties:
Sustainability is becoming a crucial factor in real estate investments. "There is a growing demand for eco-friendly and energy-efficient properties. Buyers and tenants are more conscious of their environmental footprint and the cost savings associated with green buildings. Properties with solar panels, rainwater harvesting systems, and energy-efficient appliances are becoming highly desirable."
Growth in Affordable Housing Sector:
The affordable housing sector is seeing significant growth. "Government initiatives and private sector investments are driving the development of affordable housing projects. Investors should consider this segment, especially in urban areas where there is a high demand for affordable housing. This not only provides a stable rental income but also contributes to social development."
Interest Rate Fluctuations:
“Changes in interest rates by the South African Reserve Bank can significantly impact the real estate market. We have experienced this first hand during the COVID-19 pandemic when record low interest rates led to an marked increase in demand for properties. Investors should therefore monitor interest rate movements as they affect mortgage rates, affordability and sale and rental demand.”
Political Stability and Good Governance:
“Political stability and government policies regarding property rights, land ownership, and real estate regulations can influence investor confidence and market dynamics. The Western Cape’s property market has for example outperformed the other provinces in recent years. This is partly linked to the perception that the province is well governed.”
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Increasing Popularity of Remote Workspaces:
The rise of remote working has influenced property preferences. "With more companies adopting remote or hybrid work models, there is a growing demand for properties that can accommodate home offices. Investors should look for properties with flexible spaces that can be used as offices, study areas, or multi-purpose rooms to attract tenants and buyers."
Revival of the Rental Market:
The rental market is experiencing a revival. "With the higher interest rates we are seeing a resurgence in the rental market. Young professionals and students are returning to cities, driving demand for rental properties. Investors should consider areas with high rental demand, such as university towns and business districts, to capitalize on this trend."
Technology and PropTech Innovations:
Technological advancements are transforming the real estate industry. "PropTech innovations are streamlining property management, sales, and leasing processes. Investors should leverage technologies like virtual tours, online property management platforms, and smart home systems to enhance their property offerings and improve operational efficiency."
Focus on Security and Lifestyle Amenities:
Security and lifestyle amenities are increasingly important to property buyers and renters. "Gated communities, secure estates, and properties with lifestyle amenities like gyms, pools, and communal spaces are in high demand. Investors should consider properties that offer enhanced security and desirable amenities to attract high-quality tenants and buyers."
Regional Market Differences:
Investors should be aware of regional market differences across South Africa. "Each region has its unique market dynamics," Goosen explains. "For instance, the Western Cape is known for its strong tourism and expatriate market, while Gauteng remains the economic powerhouse with high demand for residential and commercial properties. Understanding these regional trends can help investors make more targeted and profitable investments."
Goosen outlines key trends in the South African real estate market that investors should be aware of. From the shift towards suburban living and the rise of mixed-use developments to the increasing demand for sustainable properties and the revival of the rental market, these trends offer valuable opportunities for strategic investments in a dynamic market environment.
READ: Becoming a property mogul in South Africa
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, last month shared a few golden nuggets of wisdom that could help any young property investor start on their journey towards becoming a property mogul…
- The key is to start small. Begin with lower-cost properties to minimize risk and gain experience. Focus on up-and-coming areas with potential for appreciation rather than established, expensive markets. Affording your first property will always be the most challenging. Thereafter – because of house price appreciation and the home’s ability to generate income – each property you add to your portfolio becomes just a little easier to afford than the one before.
- To be a successful real estate investor, you need to be there at the right time, right place. This is where developing a close working relationship with a reliable real estate professional is crucial. As the local expert, real estate professionals are able to share market insights and trends which can help investors spot the right opportunities that will suit their risk appetite and budget.
- Part of being successful is the ability to act when the right opportunity arises. This means working out in advance how to finance your next property purchase. There are several ways to afford this. For example, you could use the equity from your existing properties to finance new purchases; you could team up with friends, family, or other investors to pool resources; or you revert to traditional home finance if you can afford to do so. Work closely with a financial advisor to find out which option works best for you.
- As with any investment, diversification will help to minimise risks. It is better to invest across different geographic locations to mitigate suburb-specific downturns. It might also be prudent to invest in a mix of residential, commercial, and industrial properties to help spread risk across different sectors of the market.
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