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To make the best possible property investments, you need to have a basic understanding of the economy and what makes it turn. The American economist, Tyler Cowen, made the following powerful statement: “Economics is everywhere, and understanding economics can help you make better decisions and lead a happier life.”

Watch our YouTube video, Does it Still Make Sense to Invest in Property in South Africa?

Gross Domestic Product (GDP)

The International Monetary Fund’s (IMF) World Economic Outlook predicts a 3.2% growth in 2024 and 2025.

In South Africa, the International Monetary Fund’s (IMF) predicts a GDP growth of 0.9% for 2024 and 1.21% in 2025.


The IMF defines inflation as “the rate of increase in prices over a given period of time”.

According to Trading Economics, the annual inflation rate in the US is 3.3% in May 2024 compared to 3.4% in April 2024. The target inflation rate for the US is 2%.

Trading Economics shows that the annual consumer price inflation in South Africa was 5.2% in April 2024 compared to 5.3% in March 2024.

Interest Rates

In the US, the Fed left the target for the funds rate unchanged at 5.25%-5.5% (highest in 22 years!) (6th consecutive time).

The current prime interest rate in South Africa remains unchanged at 11.75% since May 2023.

Many economists expect interest rates to remain high worldwide and in South Africa, possibly resulting in a decline in property price growth. But there could also be more people who need rentals as fewer people can afford to purchase property at higher interest rates.

But it’s not all doom and gloom. So, where do we go from here?

Property Price Growth

According to Lightstone’s Residential Property Index (end of May 2024), property price’s current annual capital growth is 3.22%.


Interestingly, Lightstone also says that coastal properties have performed better than non-coastal properties since 2014, and freehold properties have performed better than sectional properties since 2010.



And as I’ve mentioned before, high-value properties aren’t always the best investments as Lightstone shows that properties valued at less than R250 000 have outperformed all other value bands for most of the last 10 years with over 10% annual capital growth per year for most of the time since 2016! Properties valued between R250 000 and R700 000 have come in second for most of the time since 2017.


The map below shows the latest provincial house price inflation status from Lightstone.


Collections and Good Standing

Being a landlord or property owner is a delight when tenants are in good standing and paying rent! TPN defines tenants who are in good standing as those who “have paid in full and on time, paid in the grace period or paid late”. They also say that an account is only in good standing when fully settled with no arrears.

According to the TPN Rental Monitor Residential Sector Q3 2023 report, residential tenants in good standing have recovered from the 73.50% at the beginning of the pandemic to 83.34%.


The province with the highest rental good standing is the Western Cape with 86.87%, followed by the 5 smaller provinces at 84.45%, the Eastern Cape with 84.25%, Gauteng with 82.47%, and KwaZulu-Natal with 76.45%.


Rental Escalations

Inflation has escalated from the beginning of 2021. Rental escalations followed suit from the end of 2021, according to the PayProp Rental Index Q1 2024 Report.


The above graph shows the weighted average national rental growth rate (year-on-year) versus inflation. Overall, our national rental growth rate seems stable.



So, where does all of this leave you and your property investments? This is my take on our current property forecast and economic outlook.

Firstly, it’s still a buyer’s market out there with high supply and lower demand. And people are desperate, so you might just snag a great deal!

Secondly, the rental market is recovering with fewer tenants in arrears and increasing rental growth. And when you buy the right types of properties, property prices are still going up.

Thirdly, property is still one of the best investments. Your ungeared return on property (capital growth plus net rental yield) remains much higher than returns on other investments, including the JSE.

Read our article, Why the Returns on Property Investment is Higher than you Think.

Therefore, I am still a champion of property investment and wholeheartedly believe that although the sector appears cloudy at the moment, there is always an opportunity to make it rain.

Read the entire article in the July Edition of Real Estate Investor Magazine.