SA property market: Where dreams come to die

Never, ever buy an empty stand.
Picture: Shutterstock

Everyone who buys a residential property is a dreamer. You dream of owning your own home; a place where you can settle down and raise a family and have your friends over for a braai to watch the rugby or soccer on a glorious summer day.

It’s the ultimate middle-class dream: to become a property owner, owning an asset, that over time — using the magic of gearing — will build your wealth and provide you with enough capital for the next step up the property ladder into something bigger and better.

And if you really want to dream big, you buy additional properties, again using gearing, to rent out to someone less fortunate than you who will then pay off your mortgage bond(s) over ten or 20 years, and presto: you are a rent-collecting landlord.

It looks so easy on paper. You even attended one of those buy-to-rent investment seminars where some guru with an American accent comes to tell you how easy it is. Or possibly one of the locally-grown copy cats who got onto the band wagon. What could possibly go wrong?

How different reality is right now. Every morning thousands upon thousands of SA property owners and speculators, with the exception of the Western Cape, wake up with a scream from a nightmare. A nightmare that does not seem to go away. And it’s always the same one….

Property prices are plunging, tenants are not paying their rent and the debt collectors from the banks, municipalities and home owners’ association are knocking on your door, eager to collect what is due from you.

One slip up and your credit record is impaired, a stain on your credit worthiness which is very difficult to erase, like sitting under a mulberry tree with a pure white dress.

And for those still trying to sell up in the North in order to join the Great Trek to the South, the news just seems to get worse. Many have simply given up as (a) they cannot sell and (b) prices in the South just don’t seem to lose any momentum. But it will, dear reader, it will. The cure to high prices is high prices. Not everyone can sell up and move to the Atlantic Seaboard where new building prices seem to start at R70 000 per square metre! 

Looking at the raw numbers

Every now and then someone tries to talk up the property market in a desperate attempt to flog this dead and dying horse.

I spend a lot of time reading the regular property reports prepared by FNB, Absa, Standard Bank and Lightstone. They make for some very depressing reading.

It now takes almost six months, says FNB, for a house in the price bracket above R2 million to be sold, and then at a substantial discount to asking prices.

Turnover levels in this category have also plummeted.

On average property prices in real terms are now down 23% from its peak at end 2007 and prices in certain areas are starting to show declines in nominal terms as well. Our banks must be watching this development with great foreboding.

Rental collections also tell a story of a market slowly imploding. According to the fourth quarter 2016 survey (the latest available) done by Tenant Profile Network, both vacancies and non-payers are still rising. In this quarter, which therefore does not reflect the impact of the credit downgrades in April, national vacancies are 6.62% which, when added to the non-paying number, reflected no income for property owners equivalent to 12.4% of all property owners in this market. For the upper-end (R12 000 to R25 000 per month) this combined number rises to 15%!

Again, it needs to be added, the Western Cape is the exception. Tenants pay mostly on time and rentals are still rising as a result of very few vacancies.

Over the past four years or so I have written several articles on Moneyweb highlighting the slow but relentless implosion of the residential property market in SA. At first the decline was only noticeable in the smaller towns of the country’s northern provinces, North West, Mpumalanga and Limpopo in particular, but this has since spread out to the Free State, Northern and Eastern Cape and lately KwaZulu-Natal.

On several occasions I opined that it has become almost impossible to measure the performance of the residential property market in large swathes of the country, for one simple reason: if it doesn’t move you cannot measure it.

I tend to travel a lot by car, for various reasons, sometimes to meet with clients, other times to cycle some obscure cycling route in the Karoo or wherever. These travels often take me to small towns and dorpies where, I would suggest, the average Moneyweb reader does not venture too often:  Bloemhof, Wolmeransstad, Lichtenburg, Schweizer-Reyneke, Parys, Hennenman, Colesburg and so forth. Even a large town/small city like Kimberley is starting to show signs of this implosion.

I’m sure Moneyweb readers will add their own experiences from other towns and even cities that I might not have visited recently.

In its latest commentary on the residential property market Standard Bank more or less makes the same comment, the first admission from one of our large lenders. It basically says that in most small towns and in several smaller mid-sized towns the property market has essentially ceased to exist.

These towns – and the people who own properties in them – seem to have been caught up in a vicious cycle. It started, in my view, with the election/appointment in 1994 of ANC-cadres to take over and run these municipalities. Many did not have the necessary qualifications to run a modern-day town or city. What we are witnessing today at our much larger but equally poorly-run state-owned enterprises (SOEs) started at municipal level two decades or so ago.

The coffers of these towns and cities have been looted; money has been diverted from essential infrastructure spending to inflated salaries, luxury cars or unnecessary overseas travel. Author FW Johnson recently wrote about the Moretele municipality in the North West province which diverted R85 million from the infrastructure budget towards burials for councillors! And there has been nothing the rates and tax-paying property owners could do about it, apart from selling up (while they still could) or shutting up and living with the chaos.

Today only 19 municipalities outside of the Western Cape do not have a qualified audit report.

Who wants to own a stand in Africa?

Don’t think your humble columnist has been spared this nightmare. I too, wake up the middle of the night with a scream that will put Eduard Munch to shame.

Ten years ago, when the property market bubble was at its zenith, I was persuaded by an over-eager family member to buy a stand at the Falcon View Estate on the slopes of the Magalies mountain. All it took was one quick and too-easy signature on a piece of paper. Today, a decade later the stand is empty — as is most of the other ones — as the developer absconded without finishing the clubhouse, pools and tennis courts. Last month an extra levy was raised to pay the legal expenses of the Home Owners’ Association (HOA) to claw back these costs against an insolvent estate. Total payment so far for this worthless investment has been well over R1 million, almost, but not quite, wiping out the profits I made on my biotechnology shares.

Can there ever be a more worthless investment than a stand/empty plot? I have made it my life’s work to warn investors, particularly young ones, against the absolute folly of buying empty plots for speculative purposes. You will never, ever make money buying an empty plot of land from a developer, even in the Western Cape.

First, you will be competing against the developer when it comes to resales. Second, you will be competing against other speculators who also are likely to put their stand on the market at the same time as you, very much like speculators in buffalo are finding out today. Third, your exit strategy is costly (high commissions) and time consuming (weeks, if not months) and you are likely to be hit with a CGT bill if you happen to make a profit. In the meantime you are on the line for bond repayments, rates and taxes, levies and possibly extra-levies for not building on time.

So remember Uncle Mag’s number one rule when it comes to buying an empty stand/plot for speculative purposes: DON’T DO IT!

PS. Anyone want to buy a stand overlooking the Hartbeespoort dam? Going cheaply… very cheaply.

Magnus Heystek is investment strategist at Brenthurst Wealth. He can be reached at for ideas and suggestions.


Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.


“Except the western cape”! Hmm let’s examine that bearing in mind MH recently bought a property in the winelands & at the waterfront. I get the weekend argus & peruse the pages of McMansions in constantia, upper Claremont & wonder why they keep on re-appearing. I then turn my attention to Hout Bay (republic of) & count the number of “must sell or reduced to sell” listings. guess what they are increasing! All is not what it seems in w Cape. The city of Cape Town has FOUR million inhabitants- it cannot provide sanitation for most of them. Soon there will be NO water for its inhabitants- DON’T GO THERE!

And no Australians, and especially bitter ex-South Africans thank God …

Rubbish. I (an ex-Jo’burger) recently sold my townhouse in Kenilworth,CT, for R4M+ in 24hours to a Jo’burger. Made a 92% gross profit in 6 years.

Generally speaking, properties in the southern suburbs under R6M are sold within 2-4 weeks, if in the right location.Hout Bay is not one of them,for obvious reasons.

Obviously, the McMansions of R20mM and more take longer because there are not too many people around shopping in that bracket.

R6Million for a crummy townhouse?

A fool and his money.

Soon parted….

And how much went in tax & how much inflation in 6 years – sounds like a zero sum game to me!

Still waiting for an answer for how much cgt you will pay on a property that cost R750k & sold for R4m – when it’s not yr primary residence. Inflation has been running at 5% past 5 yrs – so that takes 30% away.

@robertinsydney “A homeless tent city has sprung up outside Australia’s central bank in the heart of Sydney, sparking a war of words over who should deal with it.” . I’m sure the Sydney authorities would love your help Robert so please feel free to ignore South Africa and focus closer to home. Don’t worry – South Africa will be fine without your input.

Golly gosh – when I walked past there last week no one tried to throw stones at me or in fact at anything or anyone – just rows of neat tents!

Joker “South Africa will be fine” you must be teasing your own brain !

Hi Robert…you still looking at us in RSA.? Like i said before …we have enough problems here without you making comments.I think deep down you are unhappy in Sydney..otherwise you would not spend your time trolling RSA websites.You moved away..go on with your life and leave us alone.Is there no Sheila’s over there to keep you busy….? If you cant find one ..look at a few escort websites in Sidney brother is over in Australia and he says you should be able to find some lekker girls on those sites to keep your mind of us here. F off !!

Amazing that my comment got the most ticks (enjoying the moment)! Anyway how do you know that I’m even interested in “Sheila’s”? I might be a mans man ( or whatever they call transgenders these days). Try attacking my comments & I might listen!

Hi Robert in Sydney .. I see you not top the votes anymore, Sensei now beating you

Ag please Robert , please peruse the Sydney papers, homes appear there also time after time, much more expensive than Cape Town in fact , 10 times more expensive… I have been to Sydney… it is the most expensive city I ever visited and that includes New York , London or Tokyo…in fact I eat much better here for a 10 th of the price your pompous restaurants ask over there … and I got a tummy bug from your food …

Don’t need to tell me abt Sydney house prices – I’m living the dream! My daughters all got their own properties & son will be inheriting my place – one day! It’s been amazing to be part of the biggest increase in real estate prices in the western world -EVER. Will it end? Will it all come crushing down. While interest rates remain low – unlikely. While most of the 300,000 migrants to Aus come to Sydney (with their bags of gold and degrees) unlikely. For myself – now that I am on my own (wife passed away from cancer 2 months ago) – a fully funded retirement beckons

Robert please accept my condolences on the passing of your wife.

Here’s Magnus AGAIN telling people the truth they don’t want to hear!! Just remember mostly every time you read about property, it is a bank or real estate person, telling you how great it is, BECAUSE they are the ones that make the money on property!!!
Thanks for a bit of common sense Magnus.

Well, for once Magnus is 100% right, in other articles his % of rightness varies greatly.

Always interesting to read Magnus’ stuff. The one rule about buying property he did not mention: never, ever buy property while you are on vacation…… that includes time share especially. Two remarks : I still don’t understand the exponential rise in property prices for agricultural land though (off topic I know but still a complete mystery to me). Its simply does not make sense vis a vis the political climate and the yield (if any) you can expect. Secondly: its time we modify the realtor/agent model in South Africa. The commission adds to the price and the “service” you get is out of proportion to the value. There is nothing it adds in value to the transaction except cost. The willing buyer /seller model plus a lawyer is actually all you need.

Boepens – the main reason for the steep rise of agriculture land prices is because it is a very scarce resource with a huge demand for it.

thanks, Ham. I get that part. What I don’t get is land appropriation is going to happen no matter who wins the elections, no doubt in my mind with populists like Malema et al spewing Venezuela-like rhetoric. Why would you knowingly invest in something you know is going to be taken from you in the future …. ? The risk /benefit ratio does not compute for me. Water is our next crisis in SA and if it does not rain you don’t harvest. Its almost like investing in the mining sector to my mind. Cheers

Ham, what demand ???

You can buy game farms for cheap north of PTA

Farms and plots v cheap in outlying dorps etc

Only farms etc fetching top $ are CT


The only reason I can imagine is using a very large loan. By putting down a small percentage only and using bank loans for the rest and for operational expenses, a good farmer might actually get a very good return on his initial investment. If the farm is taken away without compensation or below market value compensation then it is the bank’s problem. I am not certain at all if this is the reason but for me this would be a logical explanation.

“… then it is the bank’s problem” Not really? In US you can walk away and it is the bank’s problem, but over here, you remain liable, even if the equity in your home is under-water.

I would like to see a bank going to court enforcing a debt on a property which was taken by the state. Anyway, I think in SA the bank hangs on to the property deed until it is fully paid. Of course a property invasion envisioned by the EFF is a different thing, then I can see the bank has some claim.

Hun, you do NOT want to get into a fight with a bankster

They will ATTACH every asset you have to recover their debt.

You WILL be blacklisted.

And plenty of other not nice things

NO bank has EVER lost a fight with man on the street [ reads like a Mayweather fight history…..50 to 1 ]

Rather pick a fight with a pit bull.

You will come off better

PS kudos to Sensei and Boepens thread here

Informative, and something long on my mind [ farms and the inherent looming expropriation etc ]

However, what they both ALSO fail to address is FARM MURDERS, which is having a DISASTROUS effect on our farmers !!

Noone seems to have even touched on this here ??

1. Farmers are under severe pressure to buy land in order to get scale-benefits as their margins are squeezed due to subsidized imports of grains.

2. Farmers generally do not trust alternative investments. They view listed property or a share portfolio as too risky. All there expertise is in agriculture, so they invest in something they are in control of.

3. Property developers and mining companies support the price of agricultural land. Farmers who sell their land to mining companies or to property developers can buy 10 times the hectares.

Another factor very view commentators reflect on, is how the record-low interest rates in the developed world support the value of agricultural land internationally. As the yield on the government bond approaches zero, the value of the bond rises. The same is happening to agricultural land. Pension funds in Germany are looking for an alternative source of yield, so they begin farming in Kazakhstan. They are happy with zero income from the farm as long as they get the capital appreciation – for it would be no worse that an investment in bonds.

It is a fact that South African farmers have been the best fund managers on earth over the last 30 years. The value of farmland outperformed all listed opportunities anywhere on earth. For that reason farmers buy more land when they can.

Regarding the effect of the possibility of the appropriation of land on the current value of land. The timing is good for the investor because the political tension does create a discount to the value, and a buying opportunity.
The transaction itself is actually a call option on the Constitution of the country. If the law does protect property rights, the buyer gets a huge payoff in the form of capital appreciation. If land is appropriated without compensation the buyer only loses his deposit(premium in this instance). Farmers are very astute businessmen my friend.

gotcha, informative line of thought. The law will not protect property rights the way I see things going down not with an immoral government in power. How does this play out for instance in a Zimbabwe scenario where the farmer was left with his bakkie and his dog … ? Are we not assuming rule of law and property rights are respected in future in SA ? Would really like to hear yr view. Losing a deposit is the least of your worries if you have no income to look forward to, no? Plus, the banks (fair weather friends if ever I saw one) won’t shoulder the loss alone will they? They will first strip the buyer of everything before they take a haircut. As far as astute farmers are concerned I agree, they have to be to survive.

Boepens, this is a very interesting topic you have started here. Farmers buy agricultural property and support the price of land because banks are willing to finance them. The board-members of those banks are not stupid, ignorant or ill-informed. They view the financing of agricultural property, as well as the financing of production loans with agricultural property as collateral, as low-risk business.

The reasoning is as follows. The South African government (ANC hooligans) runs a deficit to pay social grants and to pay salaries to the useless SADTU teachers and all the incompetent ANC cadres in government. Who finances these deficits? The banks have to buy government bonds. This implies that the banks are financing the government deficits and the salaries of ANC politicians and cadres.

The international banks, pension funds and buyers of local government bonds in general will simply stop funding the government in the event of appropriation without compensation. Such a move will force the government to beg for mercy with the IMF. The IMF will demand a free-market system, privatization of all SOE’s, a downsizing of government employees and respect for property rights.

That brings us to the point. All politicians (Malema included) know that they live at the mercy of the International Finance Companies and local banks. Typically politician, they will talk and promise land for all but in the end their actions are determined by the one who pays their salaries.

Magnus, dankie vir die waardevolle artikels wat jy elke keer skryf. Hou so aan – ons leer elke keer.

South Africa faces the problem of politicians and councilors who grew up in a feudal system under traditional leaders, and now they received the power and responsibility to manage systems in a free-market economy where people have property rights. The fall of the Berlin Wall showed us the difference in attitude and work-ethic between people from West Berlin and East Berlin. In many instances they shared common ancestors.

It comes down to this – it is almost impossible for a person whose ancestors did not own property, to take responsibility for the protection of property rights. The crime and corruption and lack of skills and ethics we witness at all levels of government, are signs of the total disregard for property rights.

This is why property loses value fast in all regions where people from a socialist background(rural feudalistic communities) are in control, and gains value in regions where leaders do respect property rights.
This is why the economy is imploding under ANC rule. Capital runs from socialism to a place where it is understood, respected, nurtured and kept safe. The fact that we are ruled by people with a socialist mindset is maybe the ultimate punishment for apartheid. Only sad that those who suffered under apartheid are also punished.

To my mind the second issue with our politicians is this: very few if any of them actually have a profession outside of the political trough they currently feed from. In the first world if a politician is voted out of office they return to being a lawyer, home builder, doctor, bus driver whatever. Here its different. They will have to return to whatever they did before cadre deployment (a catastrophe if ever there was one) gave them a very substantial privileged lifestyle. So by hook or by crook they will cling to office but every legal or illegal means they can. I don’t mean to sound disparaging but the nett result is “democracy” fails in the process. Politicians in general and in Africa in particular are in the business of getting re elected and nothing else. I am sympathetic to the graft of the Guptas in the sense that if anyone with basically no skills and no livelihood is offered a bribe of millions or billions its going to take some fortitude to say no. Its a pity SA has so many Des van Rooyens and so few Thuli Madonselas. C’est la vie I suppose

Maybe the reason for apartheid was the fear of being ruled by socialists/communists.

You are spot-on there! R.W. Johnson wrote that Gen. Smuts told British politicians if South Africa ever had a democratic dispensation, a Zulu Chief would be president. The problem is not the president being a Zulu, but that he is feudalistic, and that it would ruin the economy.

How prescient those words were.

Brilliant synopsis Sensei !!

This is something I have long postulated.

In fact, this summary is proved even in the REST of Africa !!

That is why its basically a shambles

In a nutshell, the cornerstone of ANY country is its property rights.

Without that, like the domino effect, everything else fails.


There is a good reason that house price inflation in Western Cape outpace the rest of the country – it is a great place to live. With all due respect, to compare a plot in Magaliesberg with a plot in Camps Bay is simply ludicrous. The Western Cape is the best run metropolis on the African continent. There are few potholes, the traffic lights work, and if you drive drunk – you will be arrested. In addition, City of Cape Town guidelines prohibit unsightly billboards, and STRICTLY police unscrupulous property developers and their zoning restrictions. Add the schools, public spaces (Geen Point Park) – and you have a very compelling reason to pay up for every square meter

Until the squatter wrot in Houtbay reduces property values and forces owners to sell, not a willing buyer willing seller in a seller’s market. I almost bought in there in December, but I saw the writing on a boundary wall.

well done sir- you have missed a blood bath (financially wise of course). but what has happened in Hout Bay is a reminder of what’s going to happen everywhere- with another one million soon to be unemployed

“it is a great place to live” (Western Cape)

Utter twaddle! You fail to mention:

1. Cape Town is on the verge of running out of water, due to the population doubling to 4 million since 1995, and very little planning by the DA (one new dam in 2005, that’s all)

2. The permanent traffic gridlock. No more “rush hour”, the roads are chock-a-block from dawn till night.

3. The DA has densified Cape Town by encouraging greedy developers to buy up little old ladies houses and build humongous souless blocks of flats (filled mostly by foreigners from North of our border), turning ex-leafy suburbs into urban hell-holes. Also explains why we ran out of water

4. The number of incidents of violent rapes and murders (recall the recent Stellenbosch student, and the girl in Tokai forest last year). People forget that Cape Town is one of the most gang-infested areas in the world (Manenberg etc), just over the railway line from your ex-leafy suburb

5. Traffic law enforment is just as corrupt and inept as the rest of SA. They also hide behind a bush and visible policing is absent.

6. Property rates (due to the so-called Cape Town property boom) have skyrocketed, and you still get the crappy service as the rest of SA.

Who wants to pay upwards of R10 Million for a small property in Cape Town, where you just about need a letter of permission from de Lille to flush your toilet? Where you drive your Beemer in a constantly filthy state due to no longer being able to wash your car? (unless you brave a “chemical wash”) Where your swimming pool stands empty, and your lawns turn brown? Where you fear for your wife and daughter due to the violent anti-white rape-murder attacks from the local gangstas? Where you spend 3-4 hours in traffic to and from work every day?

Ag please tjomma , that can be said of a lot of city’s including Los Angelis, most of South America etc etc

Ja, I heard Venezuela is a hot place to invest right now….

At least they have good old H2O still……

You are correct on most things here

A little exaggerated on some, but yes, a lot of ppl blindly not facing the truth

However, that city/urban decay you are describing could the also be applied to a LOT of international cities now [ LA…….Paris and its outlying refugees streaming in…same with Stockholm etc etc ]

Hey, its a people problem I guess

Just too many streaming in !!!!!

At least the DA runs JHB and PTA now too, but it will take a while to reverse the rot.

maybe not for long….

After the Zille Twit debacle the DA has lost masses of Black votes, plus half of Gauteng came to buy matchbox size houses in the Western Cape as part of the Groot Trek Pt II, thus depleting typical DA voting stock in Gauteng……

Magnus Heystek

In simple child-like terms, how would the April foreign currency rating downgrade have negatively affected “both vacancies and non-payers”? That is, how would one observe/see such an effect?

It means that the worst is still too come.
It should be obvious.
Maybe you should Think-B4U-Reply.

Thanks for always telling us how it is MH – appreciated.
If I may, currently paying off a nice two bedroom flat next to a Private Life Hospital & live in my wifes property. We are both 34 with 2 kids.
A.) Do I sell & place cash offshore namely into Facebook & BRK B Shares. or do I
B.) Keep Property
One House – One Spouse – Second Hand Car – Thank you

Oh dear 😉

I did NOT reply.
I THOUGHT about a particular part of the content of your article and I did not understand it.
I ASKED a question related to the part I did not understand.

You claim that “…the survey… does not reflect the impact of the credit downgrades in April…”. The QUESTION was and still is. How does the downgrade affect “both vacancies and non-payers”?

E.g. To make my question clearer, you could answer the question by claiming that renters have lost their jobs due to the downgrade.

Now this above is certainly a REPLY and I have THOUGHT B4 I REPLIED.


Magnus does not reply to difficult questions but obfuscates. I habe noticed Logical answers to queries about his statements are not something he does.He does however make sarcastc comments that masqurase as answers 🙂

Magnus have you diarised 7 November as you mentioned in a previous article?

I have been privileged to travel to numerous African countries for work, one thing I can tell you is that THE RIGHT property in an African country will never lose value, they actually become more and more valuable. The rent we paid for expats in some of these countries were far above average. Granted, these countries(Angola, Kenya, DRC, Nigeria, Ghana, EG) were all still riding the oil & gas industry wave. My point being, I think the right property in South Africa would still retain value, everyone won’t be able to escape the dark continent, there will always be a demand for housing, especially property with excellent security. As always the key to property is location, location & location. You also don’t emphasize the importance of wanting to own your own piece of land, modifying it as you like etc.. you mention it in your first paragraph but it’s actually a very important point/milestone for some + surely it is still better to pay off your own piece of property than being the tenant paying off another persons property.

If only (famous words right?) I had read (and believed) this article 15 years ago when I bought an empty stand in Potch. I lost more than a R100k, that’s a lot for a student. Some gray heads did warn me, but I was clever back then.

IMHO…I can’t understand the logic of buying an investment asset with no capital appreciation, no daily valuation, high entry and exit fees and a coupon that the payer can decide not to pay (with the support of the legal system) + high additions costs (rates and taxes, fixit etc)

Investors in unlisted property take this huge risk because they believe it is the only way to get gearing.

Investors in unlisted property are not aware of the correlation between bond prices and property values and secondly, not aware that gearing in listed property can be attained at a fraction of the costs involved with physical property.

How do you invest in listed property with gearing?

Gtech, you can buy listed derivative instruments (on SAFEX) on listed property companies or on the index. Then you can also buy a CFD on listed property. In these cases you pay a 10% to 20% deposit, or margin as it is called. The risk/return profile is better than for physical property and the transaction cost is 10% of the cost involved with physical property.

It gets even better when you buy property listed in the USA, with REITs like Physicians Realty(DOC) or Community Healthcare(CHCT) you get the gearing at an interest rate of 2% while the yield is 5% to 6% and you have got a rand hedge thrown into the deal.

No worries about the useless ANC clan, rising municipal taxes and levies, defaulting tenants, bursting geysers and burglar bars. The greatest advantage is liquidity. You can buy or sell your property in the time it takes you to get on the internet.

You see – this is what these hopelessly inept and corrupt local politicians don’t get – there are much better opportunities for our capital offshore. We don’t need to enslave ourselves under their socialist laws. The ANC is in fact creating a market for offshore property, they are boosting property prices overseas buy chasing away South African capital.

@ Sensei

Thanks for the information, very useful. Agreed on capital mobility.

As an aside I think “unlisted” residential property (even taking into account the transaction costs and lack of liquidity) can be a very good asset when bought at the right point in the economic cycle and in the right location.

I made >13x my initial investment in Resi in 10 years and this would have been well >20x had I been able to get into the market in 2003 rather than 2007. I wouldn’t buy now of course, not for some years.

I’ll look at those REITs more closely. Cheers

Hello Magnus,

Thank you for the article.

I live in Cape Town and do not leave it very often so I will take Magnus’s word for it re the rest of the country. I however cannot fathom prices in CT, even if there are all the benefits of good municipal services etc. Both rents and prices are extremely high, yet salaries are low compared to GP, and surely the recession also affects the WC, Pick n Pay just announced big job losses, and their HQ is in CT.
I have been looking lately for a rental property in Hout Bay (could buy but think I would be crazy to), and have noticed the same properties week after week being advertised for rent. I believe there is a huge element of greed involved in the CT property market (eg.foreigners/Gautenger’s are buying etc which is why it so expensive..etc etc), which will end in tears for some.

Lastly, I have been reading a book about Marc Faber recently on booms and busts, and he says ‘I have never seen a boom during which investors didn’t ardently believe that foreigners (read Gautenger’s..)would drive prices higher’

The CT property “boom” will soon go bust when the taps run dry and Zille is put out to pasture in 2019…

Even though I received an offer within 24 hours (from a Jo’burger),I kept my Kenilworth property on the market for a few weeks to see if I could get a clean offer (no subject to).90% of people who came to look at it were from GP.

You remind me of the typically smug CT property owner who had some good fortune. Does not mean there is an endless supply of GP buyers into infinity however, what will they be selling to buy these properties given the subject of MH article, or what jobs will they get in CT to afford bond of R4m?

If I could vote for your comment 100 times I would RossZAR. 1000% spot on. I live in CT too and I have come to the conclusion that I will have to leave. Some of my friends who are analysts all agree there is a property bubble, but when will it burst??? I am currently looking to move to JHB. Salaries are higher and property cheaper. I run my own business part time, so hopefully will be able to do it full time once in Jozi.

With regards to possible collusion (Foreigners, Gauntenger’s etc). There may be something worth investigating there hey…..

Good article, just ask those property moguls that are sitting with a piece of land in Tembisa extension called Serengeti Golf Estate. You can’t give the stand away for half the price you originally paid for it.

Not correct. That was indeed the case during 09-14. But the last two to three years have normalized things. If you walked into the sales office now, or look on property 24 or whatever, you won’t find a cheap stand anymore.
Serengeti is one of the few success stories (for the homeowners that is; I am not sure about the developers). There are currently over 100 homes being constructed, over 700 levy payers and the R21 corridor is booming

You are right about the empty stand syndrome – as it pertains to far flung areas – very few empty stands in far flung areas have increased in price over 10 years – golf estate etc included.
However a plot of land in suburb or township would typically change in value in sync with the houses surrounding it. Problem is its a cash purchase – no gearing allowed by banks.
Choose wisely !

Darn Magnus … the truth hurts …. sigh. Fresnaye is a huge building site, (employing hundreds of labourers) but reasonable prices still exist in Simon’s Town – the last colonial outpost.

Panama hat required …

I can honestly say the “Western Cape is overpriced and about to collapse” comments have been exactly the same for the last 30 years, and i’m sure before that probably as well. I have been listening to that EXACT same story for a long loooong time.

I’m sure at points there will be weakness and then they’ll have their “i told you so” moment for a while.

I wholeheartedly agree with you talker. The same can be said for the other doom and gloom predictions glibly made by contributors like robertinsydney and rfjock above – “The CT property “boom” will soon go bust when the taps run dry and Zille is put out to pasture in 2019…” They will be nowhere to be found when their predictions proove untrue.

As an Eastern Cape refugee(no service delivery,even in the suburbs, by ANC administration) I semi-grated to the C.T. In 2008, in the middle of the financial crisis.

Horrified by house prices, I thought I would wait for them to come tumbling down as a result of the crisis.BIG mistake, prices kept going up and then started soaring when the trickle from GP,EC and KZN became a flood.

It’s going to be a long hot Summer2017/18, starting next month…

Cape Dams sitting at 25% capacity, where they were 50+% this time last year…

Triple Junk Sttaus is on its way shortly, the CT economy will tank just like the rest of SA, and your property investment will tumble.

So you can sit pretty staring at your brown lawn and empty, windswept swimming pool and feel very smug and sipping your (imported) bottle water next summer.

What goes up, does come down.

30 years ago there was racial separation, pass laws & very few black indigenous people living in w Cape. That’s all changed

my 2c – we invest for the long term always. So diversified equity portfolio, diversified bond portfolio and diversified alternatives (property etc). By diversified I mean geographic too. Your investments in any country are always at risk, and risk management is key. So 100% in SA/UK/US/Aus/Cape Town is foolish.

You can have some investments that are illiquid property in SA, as long as you have liquid investments in other jurisdictions. Your risk on the illiquid property is the one highlighted in this article.

No-one can forecast the future, so don’t waste your time, and rather risk-manage. It is afterall, your capital.

Thanks for a bit of commonsense jblack.

“If a man is proud of his wealth, he should not be praised until it is known how he employs it.” Socrates

I agree that property prices have climbed to dangerous levels in several advanced and certain emerging market economies, raising the risk of massive price falls if markets overheat, and the risk that the US $ at some stage start rising on predictions of higher inflation and the prospect of diverging monetary policies in Euroland,
During the last two significant Financial Market Crashes in 1987 and 2008 the property markets worldwide also dropped significantly, except in popular cities like London, Sydney, Tokyo etc.

Brexit, I think might have a limited effect on property prices in London, but I think that if said property price falls in Britain following the vote to leave the EU could “be good for the UK” if the adjustment is borne mainly by foreign investors.
I think the five-year bull run in which prices surged by 75 per cent in Sydney and more than 55 per cent in Melbourne has caused an affordability crisis, bringing housing to the front of the political agenda, and very vulnerable from here.
I remember way back in the days of the Fin Rand already, how many property transactions our FX Treasury department did with offshore investors, because of the discount they received with regards to the commercial rand.
And yes, I know the market changed many moons ago but most property in the popular Cape Town suburbs are bought by offshore cash offers, before the locals can even start considering ‘’an offer to purchase’’, even today!

Not correct. That was indeed the case during 09-14. But the last two to three years have normalized things. If you walked into the sales office now, or look on property 24 or whatever, you won’t find a cheap stand anymore.

Serengeti is one of the few success stories (for the homeowners that is; I am not sure about the developers). There are currently over 100 homes being constructed, over 700 levy payers and the R21 corridor is booming

still moderating me comment or just taking a long lunch mw?

Wouldn’t one expect to see more home loan impairments at the banks as a leading indicator if there was really such a lack of appetite for property outside select areas in the Western Cape? ABSA Home Loan profits were down 9% now but there don’t seem to be any really nasty reports such as those in the 2008 US crash.
If taxes connected to property get even nastier (with the wealth tax seemingly coming and possibly based on proprety values plus capital gains inclusion rates rising) I can see that having a negative affect on the Western Cape.
Furthermore, if the economy were to really turn nasty and there was no relief from taxes one could imagine something like the interesting situation currently in Greece:

All doom and gloom – As always MH – Just had a look at my share portfolio – Year do date – Dischem up 45%, Capitec up 40%, Discovery up 15%, Echo Polska up 10%, Sirius 18%, Core Share SP 500 up 15% – All through a low cost platform with no ongoing admin fees 🙂 – The SA economy is struggling but there are always opportunities – It must be tough being so negative all the time 🙂

try telling that to the millions of people in the ” imploding ” little dorpies with absolutely no future. Their only hope is to vote for the ANC again ( or EFF ? )

What is the low cost platform Gemini?

I dont really care about capital appreciation, especially when im getting a steady cash flow. Cash flow always trumps net worth.
Finding a reliable tenant is also no problem, if you own a property in an area that is in high demand.

Cashflow is king. Long live the king.

However will happily take some good capital appreciation (profit) too.

What could possibly go wrong? 12 years ago I bought a house in one of these obscure dorpies for R230 000. That time I thought it was a moerse bargain and good investment ( very proud of my house ). The house was 60 years old and in a good condition, near to schools, shops etc. The dorpie with its infrastructure also in good condition. Today, 12 years later, the dorpie totally ” imploded” (fubar!) and will never recover. My house, 70 years old, also start to implode: pipes are bursting, geyser going…..not worth to maintain any more. Not so good investment anymore.

Cheap houses are good for everyone except the banks and speculators.

I am in the market to buy. so hoping prices go down more…

Everyone knows someone with a plot they can’t sell. Almost fell in the same trap, but fortunately I joined the caravan & gazebo brigade too late in queuing for a plot. People were parked on pavements and having a nice braai joined by family and friends that would queue for them because of limited stock. Looked way too much like a gold rush to me and left. You can still feel the aftershock of the implosion.

If WC water dries up, so will Gauteng buyers.

Can there ever be a more worthless investment than a stand/empty plot?

Sorry MH – not my expererience.

I own(ed) houses and stands. I have never lost on this. I buy to hold and sell when I feel like it – usually with no drama – and at prices in excess of what I originally paid. I use only cash – no loans.

In past 14 months – sold Bryanston (held 3 years) and Plettenberg bay (held 6 years) area stands – for healthy real terms net profits.

I think your rule should not be formulated on your own experience and should – perhaps – include something such as -BUY AT THE RIGHT PRICE AND NOT IN A DEVELOMENT FROM A DEVELOPER.

Anyway – this ties in well with your – nobrainer- to invest offshore.We have had that discussion before.

A man of your considerable talents should have been taken up in cabinet by now – expect you will ‘talk down’ investment in SA to the tune that I and many others will never want to invest there again – and those in the markets want to get out – at any cost

MH – suggestion – next time you cycle in the beautiful SA country side – think of something positive to write about? – – there must be something good you can record – even if only what nice people live and work in SA

Well thanks for the great advice. So according to MH we should all sell our homes and move off shore. Now why didn’t I think of that…. IMHO there are two things every person must do they must eat and must sleep or they will die. So guess what there will always be money to be made in those two commodities just use your head!!!

Ja, the ANC has been very successful at its transformation process, it has turn this country from a first world in to literal junk. Well done ANC you have not failed to meet our expectations, it just took longer than we expected but we got there. You have just confirmed the reason why the previous dispensation refrained from including you in running the country.

who knows may be the DA will finally clean up JHB, PTA & PE. That’s if there’s anything left to clean up after 20 years or neglect,plunder and blue light luxury convoys.

read my lips – THE DA WILL BE FINISHED AT NEXT ELCTION. people have seen thru their racist settler mentality

My Anecdotal evidence. My Parents have lived in Margate/Uvongo for the last 20 years. about a year ago he decided to move on due to lack of opportunity, imploding water infrastructure & and a delightful informal settlement popping up just down the road. They have 1 – 7 Bedroom house that has been operating as a B&B for many years and another 4 Bedroom house on the same property. Around 2008 they turned down offers around 5 – 6 Million. Today they can’t sell it at 3mil. Been on the market for over 8 Months.

1. If there are any buyers out there, let me know I can organise a bargin.

Big Mag, never say never, but in Arika say”Pasop”
I have done very well out of the property market but one needs to be very careful- Hillbrow , Yeoville, and Windsor in JHB bear proof of this. one needs to keep an eye on who is moving into a ” buy to let area ”
this crappy govt does not help the way it protects the lessee
A big NO NO is using letting agencies , they place the first piece of rubbish who helps to pay their finders fee- very unethical people.
Come to think of it fund managers are no different-
look at what Armitage and his crowd did with Anchor when they wanted to take huge fees for themselves

I have absolute and 100% confidence that things are going to turn dramatically upward in the not to distance future. The reason that i believe so in because of our rapidly growing “assets” base. Those assets are our rapidly growing well educated and skilled labour forces. I see them everywhere in the work place. Yesterday my internet connection failed so i got onto my bicycle to go for a ride and along the route found two Telkom technicians working on joining fiber optic telecommunications cables at a DB box. I went over and spoke to 2 young black men not older than 30 years who i could see doing a great job.

End of comments.



Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.

Follow us:

Search Articles:
Click a Company: