South Africa is Africa’s biggest economy, with an estimated population of 56.5 million and an estimated GDP per capita of US$ 6,089 in 2017. It has formidable manufacturing and financial sectors. It is the world’s largest exporter of gold and platinum. Tourism is also a key source of foreign exchange.
South Africa, which is a prime holiday destination, means that the country is home to a picturesque landscape, both diverse and naturally beautiful. There is a location to suit any taste, from beautiful blue sea and sandy white beaches, to evergreen winelands set in the mountains, extensive nature reserves and game parks, as well as the ultimate whale watching and shark diving experiences. With so many visitors flocking to South African shores to take advantage of the excellent climate and endless natural beauty, why wouldn’t anyone consider making this country their home?
If you’re looking for an investment opportunity in the residential market, it’s always critical to know which types of property are best performers. In South Africa, data reveals that one bedroom and studio apartments have been the best-performing in terms of yield for over 12 years.
One-bedroom apartments are entry-level choices for most young professional first-time home buyers, says Jonathan Kohler, (Estate Links South African partner). “The thinking behind this is that two people could rent the property together or two people could perhaps purchase the property. However, this has simply not been the case, and investors in this market are not reaching their maximum return. Investors looking to purchase a property must keep two of the key principles in mind – rental return and capital appreciation,” explains Kohler.
“Whether you’re a student, living away from home for the first time, a young professional renting your first apartment that you’re paying for yourself, a first-time homeowner or a first-time investment property buyer with buy-to-let aspirations, the one-bed-one bath is generally a good place to start,” says Kohler.
To illustrate the different returns investors fetch from the different apartments, the following are two apartments located in the same complex in Johannesburg’s northern suburbs.
o If you buy a one-bedroom ground floor apartment for R740,000 ($52,158.06), you can receive up to R7,000 (US $540) a month in rent and spend roughly R977 ($68.86) on levies and R320 ($22.55) on rates. You can expect this apartment to appreciate at 8% per annum, which means you could get a net rental return of over 9% per annum, a remarkable overall return on investment of up to 17%.
o On the other hand, a two-bedroom ground-floor apartment that costs about R980, 000 (US $690,74.19) would bring you about R8,250 ($581.49) in monthly rental fees. It would cost you R1,50 ($10,57) and R420 ($29.60) in levies and rates respectively – bringing you a rental return of about 7% per annum and a total return on investment of up to15%(inclusive of projected capital appreciation).
Estate Links Ltd in conjunction with our South African Partners, Landsdowne Investment Properties, offer brokerage, property management, general contracting and asset management services, and we ensure full maximization of our clients properties to give them the best returns