New property investment trends are growing in South Africa as investors are tapping into the growing demand for coastal homes to build wealth.
According to data from Standard Bank, one in eight mortgage applications nationally over the past year were for buy-to-let properties.
The Western Cape has come out at the forefront as the leading hotspot for property investors, with 31% of new home loan applications in the province linked to buy-to-let ventures which is more than double the national average of 12%.
“Over the past decade, the Western Cape has consistently positioned itself as an investment destination. Areas like Cape Town have benefitted from consistent demand driven by tourism and a growing expat community,” Chiko Manokore, head of Personal and Private Banking, Standard Bank.
Interest in bed and breakfasts (B&Bs) and stand-alone homes within estates has skyrocketed, particularly over the past five years.
The Western Cape ranks second after Gauteng in terms of building loans issued by Standard Bank, with a large portion taken up by buy-to-let investors.
Manokore said: "You are seeing more uptake for large estates, lots of bed and breakfasts and interestingly, a growing number of people building multiple properties on a single stand."
Gauteng economic hub, continues to show strong buy-to-let activity too, nearly double the national average.
While Tshwane is leading in this regard and the rental market in the province is largely by investors that are looking for additional income streams.
"In Johannesburg, property investment tends to focus more on rental income, unlike the Western Cape, where short term rentals are particularly popular," Manokore explained.
The Eastern Cape has also had an important role in the buy-to-let market, attracting more property investment than the national average.
While the Western Cape, Gauteng and the Eastern Cape has seen increased activity, there was lower buy-to-let activity in KwaZulu-Natal (KZN) in the past year.
Only 6% of home loan applications in KZN were linked to property investment.
"KwaZulu-Natal unfortunately has lost some speed, especially in the last few years, because of the many challenges it has faced. Environmental setbacks such as floods and the 2021 riots have impacted investor confidence,” Manokore said.
Choosing a location for your property investment
Although property is generally more stable than many other investment options, factors such as market fluctuations, economic uncertainties and location-specific challenges can affect returns and even undermine the best-laid plans.
This is according to Arnold Maritz, Co-Principal for Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs and False Bay.
Managing these risks effectively is important to protect your assets and to achieving long-term success.
Maritz said: "There is a reason the key mantra for property, location, location, location has endured as the success of a real estate investment is very often determined by its location.
Here’s how you can identify these locations:
Focus on high-demand areas
Invest in properties in areas that have growing populations, strong job markets and diverse industries.
Cities like Cape Town, Johannesburg as well as smaller towns like George and Plettenberg Bay attract both residents and businesses while ensuring steady demand for residential and commercial properties.
Assess infrastructure and accessibility
Areas that tend to retain value better during economic slowdowns have:
- well-developed infrastructure
- public transport options
- proximity to amenities like schools, hospitals, and shopping centres
Emerging neighbourhoods that have planned infrastructure developments can also offer high-growth potential.
Evaluate market trends
Property investors should analyse local market trends including rental yields, property appreciation rates, and vacancy rates in various areas before investing in property.
Properties in areas that have consistent growth in rental demand are more likely to provide stable returns.
Consider tourist-friendly areas
In South Africa, popular tourist destinations like the Winelands or towns along the Garden Route can offer opportunities for short-term rental income.
However, it is a good idea to diversify within these areas to offset the risks that are tied to seasonal demand or economic shifts that impact tourism.
IOL Business