Property in South Africa - Unstable Potential

Speaking at a strategic review session recently, the president of the South African Property Ownership Association (Sapoa) reported that international investor confidence in the real estate market in South Africa is at record low levels despite the fact that a number of key factors means that there is still great investment potential in South Africa.

Recent issues cited by investors as depleting their confidence in the property market in South Africa include interest rate increases, slower house price growth and the proposal by the Land Affairs Minister that restrictions be placed on foreigners who wish to own real estate in South Africa.

However, according to the president of Sapoa T.C. Chetty, South Africa remains an exciting country in which to invest and one where there is excellent room for growth.  While house price increases have fallen from their record growth rates of 25% to a more sober and sustainable 16%, the fact that the country will play host to the 2010 FIFA World Cup is just one of a number of reasons why the South African Property Ownership Association believe that the time is still right to invest and profit from property in South Africa.

Unfortunately international investor confidence is just not high enough though and slowly foreign direct investment into the property market in South Africa is dropping.  Issues such as the fact that mortgage interest rates are already high, (eight and a half percent), and rising and that there has been no clear and definitive statement from the President of South Africa on any likely restrictions to be placed on foreigners who wish to own real estate, means that those looking at the undeniable potential are put off by the instability and uncertainty that is currently shrouding the real estate market in South Africa.

According to T.C. Chetty, the South African Property Ownership Association invited a number of representatives from the main cities in South Africa to join them at an international property event in France recently to promote the economic and investment virtues of their particular city, province and part of South Africa - but interest was not shown by any prospective participant.  The lack of concerted effort on the part of South Africa as a nation to attract foreign direct investment into the property market could be interpreted as apathy – alternatively it could be indicative of something altogether more worrying and that is that foreign investment is no longer welcome in South Africa.

Wherever the truth lies, the fact remains that there is room for profit and growth in the property sector in South Africa, but for how long that potential will exist remains firmly in the hands of the South African government and its people.

Special Reports: Property News for South Africa

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