Buying real estate in South Africa?

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Is it a good time to buy a property in South Africa in 2024?

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Everything you need to know is included in our South Africa Property Pack

Are you thinking of investing in property in the Rainbow Nation? Are you pondering if it's the right time to buy or if you should wait until next year?

When it comes to market timing, everyone has their own opinion Your South African colleague might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from Johannesburg, might have a different view and recommend waiting for more stability.

At TheAfricanvestor, when we create articles or update our pack of documents related to the real estate market in South Africa, we prioritize evidence-based work, relying on reliable data and statistics rather than personal opinions or rumors.

We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in South Africa.

We hope you find this article insightful!

How is the property market in South Africa currently?

South Africa is, nowadays, a relatively stable country


If you want to invest in properties, prioritize stability as it fosters consistent returns and potential gains. It is an information you need as a foreigner looking to buy a property in South Africa.

Currently, South Africa is somewhat stable as a country. The last Fragile State Index reported for this country is 72, which is a decent number.

South Africa has established a strong democracy and a healthy economy since the end of apartheid in 1994, which has helped to create a more stable political environment and increased economic growth. Additionally, South Africa has developed a strong legal system that upholds the rule of law and provides citizens with basic rights, further contributing to its stability.

We should now evaluate more data to see if the timing is right to buy property in this country.

South Africa will keep growing steadily


Before investing in properties, make sure the country's economy is in good shape.

As indicated by IMF projections, South Africa is set to conclude 2023 with a growth rate of 0.1%, which is quite flat. Regarding 2024, the experts say 1.8%.

However, this low number is just for the short-term, as South Africa's economy is expected to increase by 6% during the next 5 years, resulting in an average GDP growth rate of 1.2%.

The projected moderate growth rate in South Africa is still a positive thing for those looking to invest in property as it indicates a steady, predictable increase in value over time. This provides a safe and reliable investment opportunity, as opposed to a market with more volatile growth rates.

On top of that, there are other indicators to pay attention to.South Africa gdp growth

South African business owners don't have faith in the economy


How do South Africans perceive the state of their economy? The GDP forecast is not the only factor to consider. Fortunately, in South Africa there is an official metric that is regularly reported. This doesn't apply to every country, so we're in luck.

Quantifying business leaders' confidence in the current and future economic conditions, the Business Consumer Index (BCI) is determined through surveys and assessments.

According to the Bureau for Economic Research (BER)'s data, the latest Business Confidence Index value is -28 for South Africa.

Persistent power outages, increasing interest rates, and cost pressures have contributed to this negative score.

This is not new, business operators were not confident 12 months ago either. The BCI score, back then, was at -10.

A lack of confidence among local businesses in South Africa can adversely affect the property market. It may result in reduced investment, sluggish price growth, and limited availability of properties. Buyers might experience difficulties in finding motivated sellers or obtaining suitable financing options.

However, it's important to understand that this "sentiment" by itself doesn't directly determine growth. There have been cases in the past where a negative BCI didn't prevent subsequent growth. That's why it's crucial for us to consider other data points and alternative indicators to get a clearer and more complete picture.

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South Africa is issuing significantly more building permits


If you're considering buying property in a country, it's worth looking at the number of construction permits that have been issued recently. When more building permits are issued, it suggests a positive shift and increased activity in the property market.

Here are some good news: the number of building permits delivered is surging n South Africa.

Indeed, in the past 12 months, according to Statistics South Africa, the total value of building permits delivered by the municipalities in South Africa rose by 9.2%.

The data above clearly indicates that many individuals think it's a great time to purchase property.

Keep in mind, though, that there will be more properties in the country. Then, it's possible that housing prices drop in South Africa in 2024.

South Africa's population is growing but getting poorer


Before you buy real estate, think about population growth and GDP per capita, because:

  • a growing population means more people needing homes
  • a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In South Africa, the average GDP per capita has changed by -3.7% over the last 5 years. It is a concerning and unsettling statistic. However, the South African population is growing (+3% in 5 years).

Rental yields are exceptional in South Africa


Rental yield is a recognized metric for evaluating the profitability of real estate investments.

It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in South Africa is purchased for 2,000,000 ZAR and generates 120,000 ZAR in annual rental income, the rental yield would be 6%.

According to Numbeo, rental properties in South Africa offer gross rental yields ranging from 8.6% and 11.3%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in South Africa.

It ranks among the top in the world.

As seen before, there might be a drop in property prices (due to an increase in real estate supply). However, since there won't be an increase in wealthy tenants, then we don't know whether gross rental yields are likely to increase in South Africa in 2024.

South Africa rental yields

Everything you need to know is included in our South Africa Property Pack

In South Africa, inflation is projected to gain momentum


To simplify, inflation is when prices rise, and things become more expensive.

It's when your favorite braai meal costs 150 South African rand instead of 120 South African rand a couple of years ago.

If you're considering investing in a property, high inflation can offer you several advantages:

  • Property values have a tendency to increase over time, leading to potential capital appreciation.
  • Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
  • Inflation reduces the real value of debt, making mortgage payments more affordable.
  • Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
  • Diversifying your portfolio with real estate provides stability during periods of inflation.
  • Tax advantages, such as depreciation deductions, can help offset the impact of inflation.

In line with IMF predictions, over the next 5 years, South Africa will have an inflation rate of 21.2%, which gives us an average yearly increase of 4.2%.

This data is telling us that South Africa is likely to undergo inflation, so buying property now may lead to a profitable sale if its value rises over time.

If you're using a foreign currency to finance your investment, this point is for you.

over the past five years.

As a foreign investor, South Africa presents an attractive investment opportunity due to the low cost of property. However, the low value of the South African currency means that the investor may not receive a significant return on investment in the short-term. Therefore, it is important to consider the long-term potential of the investment before deciding to purchase property in South Africa.

Is it a good time to buy real estate in South Africa then?

Let's wrap things up!

2024 presents a promising opportunity to invest in property in South Africa due to a convergence of favorable indicators. The nation's economy is expected to maintain a steady growth trajectory, creating a conducive environment for property appreciation. This growth is supported by the significant increase in building permits being issued, indicating a rising demand for real estate and potential for development, thereby enhancing the value of properties.

Rental yields in South Africa are exceptional, contributing to the allure of property investment. These robust rental yields can provide investors with a consistent stream of income, making the property market an attractive option for both local and international buyers. Additionally, as inflation gains momentum in the country, real estate can serve as a hedge against inflation, preserving the value of investments and providing a degree of financial security.

The current stability of South Africa, despite some challenges, serves as a neutral factor contributing to the attractiveness of property investment. With the nation becoming more politically and socially stable, investors can have greater confidence in the security of their assets. This stability reduces the risk associated with property ownership and makes it a more appealing prospect for potential buyers.

However, it's important to consider certain negative signals as well. While South Africa's economy is growing, some business owners remain skeptical about the country's economic prospects. Despite this sentiment, the continuous growth and positive trends observed in other indicators suggest that the property market might offer a counterbalance to these concerns. Moreover, although the population is expanding, and there are challenges related to poverty, property investment can play a role in improving housing access and living standards for the growing population.

In conclusion, the combined influence of favorable economic signals, exceptional rental yields, relative stability, and the potential to counteract negative factors makes 2024 an opportune time to consider property investment in South Africa. Careful consideration of these factors can guide investors towards making informed decisions that align with their financial goals.

We genuinely hope this article has answered your questions effectively.. If you need to know more, you can check our our pack of documents related to the real estate market in South Africa.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

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