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Why Invest in South Africa

If you have been keeping up with the news, you would recognize the following:

"Average nominal growth in house prices came to 19,8% in 2003 compared with 15,7% in 2002. The average real growth rate during January to November 2003 was 12,8% compared with 6,2% during the first eleven months of last year."

" House prices have now risen by more than 58% since 2000, while consumer inflation has only risen by some 23% over the same period. "

It is a common knowledge that one has to spend around US$ 250,000 - 350,000 (about 2 Million South African Rand) in London for a small 1 bedroom flat without hesitation ! ...

Did you know that you can literally buy a MANSION in almost the same price and on top of that you can have a great lifestyle. The good news is, you get MORE for your money (the £ Pound, $ Dollar or Euro Stretches a long way ) and also even better - the interest rates have come down and are forecast to drop even more ! This is a clear indication that now is the time to buy, it IS a buyers market. New housing developments are going up left, right and centre all over the country. South Africa is on the road to a bright future !

See the map below to view South Africa and nearby countries (Courtsey of Magellan Geographix, www.maps.com).

What is the growth opportunity in South Africa?

• Average nominal growth in house prices came to 19,8% in 2003 compared with 15,7% in 2002. The average real growth rate during January to November 2003 was 12,8% compared with 6,2% during the first eleven months of last year. Interest rates are expected to fall to less than 11% by the first quater of 2004 – stimulating buying trends in South Africa. Some experts say you can expect prices to increase by about 40% within the next two years and possibly double in the next five.
• South African banks report that a further cut in interest rates of up to 100 basis in the past few months seems like a strong possibility. This will bring prime and mortgage rates to a level of 10,5%. Based on this, as well as higher economic growth expected during 2004, the residential property market will most probably continue performing relatively well during the next twelve months...
• Whilst property is still relatively cheap in South Africa, property values are expected to grow. With a sharp increase in foreigners investing in South African property, there is also a steady increase in buying from the local population and South Africans abroad, due to an upturn in income and thus spending power. Not fact, although inevitable, this will have a direct effect on property prices, driving them up steadily, this together with a recent cut in interest rates is steadily fueling the increase in house prices & demand. With the above said, this is a direct indication the current market climate indicates that it is a “buyers market” , now is the time to buy / jump on the property ladder to take advantage of the current appreciation in property values.
• With tertiary education levels rising rapidly in what was and still is a majority uneducated country there will be an increase in demand for more expensive / trendy housing as the population are expected to want a slice of the “Lush Lifestyle” South Africa has to offer. This could create an increase in demand for rental. Now is as good a time as any to buy before South Africans are priced out of the market.
• South Africa has become one of the places on the African continent where there has become a sudden awareness of property and real estate value. Properties here are extremely cheap with good rentals. Also, there is a renewed confidence in South African property investment following the recent drop in interest rates, the strong Rand and rumours of further interest rate decrease in the near future. The effect - fuelling demand for property investments and a growth in number of buyers (more demand).There is talk of the current housing boom "having legs" for another 18 - 24 months before a marginal slow down is expected.

What is the buying process in South Africa?

The buying process in South Africa is very simple and similar to buying a property in United States (U.S.A.) or in United Kingdon (U.K.) for example. It can either be an outright purchase or through mortgage from a South African bank. A buyer does not need to provide any documentation while buying outright, unlike when taking a mortgage. However, if the buyer plans to get a mortgage from the South African bank, then it is a fifty - fifty game where the investor makes an equity contribution of 50% of the purchase price of the property and the bank pays 50%.

What is involved in buying a property in South Africa?
The Real Estate market in South Africa is dominated by a few real estate agencies. The properties are usually sold by these agencies and privale sale is relatively rare.

Your RealEstate Agent does most the work and his/her compensation is drwan from the commission. The agent is paid by the seller and will looks after the formalities such as signing the contract or Offer to Purchase and requests legal proceedings on buyer's behalf. All Contracts or Agreement of Sale to acquire property or land must be in writing and must be signed by both the buyer and the seller to be valid and legally binding. Once an Agreement of Sale has been signed by both parties it is binding and neither party can withdraw without legal consequences with the exception of subject to conditions not being met.

What is the margin for negotiations?
In South Africa, properties are commonly advertised at between 10% and 15% above the price the seller expects to achieve. Once a purchase price has been agreed with the seller a deposit of 10% is typically required. The transfer of the property is handled by an Attorney and registration at the Deeds Office takes six to eight weeks.

How to get a Mortgage in South Africa?

Which are major property investment destinations? Major property investment destinations are Hartbeespoort, Pretoria, Johannesburg, Cape Town and Durban.

HARTBEESPOORT

The Hartbeespoort Dam lies about 35 km west of Pretoria and is situated in the Magaliesberg mountain range. Johannesburg is about 90 km away from here. The dam was built in 1923 and is a popular getaway spot for a weekend or just a day trip for residents of Pretoria and Johannesburg.

PRETORIA
Pretoria is the capital of Republic of South Africa.

JOHANNESBURG
This is the meeting point of the economy of South Africa and is also known as the City of Gold. Situated in Gauteng province, historically Johannesburg was a mine city in the late 1800s and has since expanded to be corporate headquarters of Multinational Companies. Property investment in Johannesburg offers investors capital appreciation, rental income and long-term lease.

The northern suburbs of Johannesburg are particularly desirable by investors; Sandton and the CBD (Central Business District) environment. The perception of Sandton as the avenue of corporate giants e.g. JSE Major Banks head office, and the high network catalyzed property values as well as rental level make this a very attractive area for investors. Prices start from R265,000 for an apartment.

CAPE TOWN
Cape Town is located in the province of Western Cape, a very popular tourist destination, and seat of government of South Africa. It offers prestigious coastal properties ranking high among the world’s coastal property investment.

Cape Town is on two sides; Atlantic coast and the west coast (Table mountain)

Desirable suburbs are Sea point, Clifton height, Bantry Bay, Campsbay and Bishop Court. In the west coast are Blouburgstrand, Parklands and Table Mountain. Prices start from R485000. Properties with a direct sea view are generally more expensive than the non sea view properties..

DURBAN
Located in the Kwazulu-Natal province, Durban city up to Umhlanga Rocks provides excellent value properties. Durban city has recently become the destination of international conferences and the regeneration of the city has had positive impact on property values. Investors would appreciate Durban due to similar weather to Nigeria, Ghana etc. It is 5 and 1/2hrs drive from Johannesburg or 45mins by Air. Prices start from R200,000 subject to a view of the sea.