Is South African property on the road to recoveryAll signs appear to be pointing to a South African property market recovery, following a sluggish four years. The Global Property Guide reported that the sector is now gaining momentum and during 2012, the house price index for medium-sized homes increased by a pleasing 9.53 per cent (3.57 per cent) in real terms, based on figures from ABSA. This is the best year-on-year rise since February 2008.
What's more, house prices increased by 2.93 per cent (1.63 per cent in real terms) during the latest quarter and in January 2013 the average price of small homes (80 to 140 square metres) was ZAR 789,400 (£56,493 approximately), according to the news portal. The average price of medium-sized homes (141 to 220 square metres) also rose to ZAR 1,077,700 (£77,126 approximately), while the average value of large homes (221 to 400 square metres) ended January at ZAR 592,800 (£42,424 approximately).
ABSA claims this growth is being driven by low interest rates and affordable mortgage finance. However, South Africa's slowing economy will impact upon the property market. ABSA predicts that house prices will increase nominally in 2013 but will stay in single digits, the Global Property Guide revealed. Increases in inflation will also put house prices under pressure.
This means that the lofty heights experienced during the housing boom between 2000 and 2006 will not take place again anytime soon. Nonetheless, the market has become a more open place for foreign investors. Overseas buyers can now own immovable property in South Africa without restriction, but foreign funds remitted to the country must be declared and documented to ensure repatriation. The news portal revealed that property bought by foreigners must also be endorsed as non-resident for repatriation.
When buying real estate in South Africa is vital to note that upon selling property Capital Gains Tax must be paid on homes. Nonetheless, conditions in the country are becoming more favourable for investment. Carollize Laing, First National Bank (FNB) Commercial Property Finance head of residential and affordable housing, explained that demand is high in the country. Competition is particularly high in metropolitan areas, but this is pricing some domestic buyers out of the market.