The index of prices for secondary housing in South Africa increased by 0.6% in August 2024 (adjusted for inflation fell by 0.8%), according to the Global Property Guide report. Real prices have been falling since May 2021.
Market history
The South African real estate market has been sluggish over the past few years, mainly due to high unemployment, weak household financial solvency and an underdeveloped mortgage market.
From 2007 to 2021, house prices increased by about 69%, but adjusted for inflation, they actually fell by 19%. Then, in 2022 and 2023, nominal house prices rose by a combined 5.6%, but decreased by 7.4% in real terms.Due to consistently high inflation, the gap between nominal and real prices has been rapidly widening in recent years.Fortunately, inflation has finally dropped in recent months.Recall that during the housing boom in South Africa (from 2000 to 2006), house prices increased by an average of 20% per year.The peak of price growth occurred in October 2004, when the annual rise was 35.7% (32.5% in real terms).
South Africa is the second largest economy on the continent. The country's population is 62.3 million people, GDP per capita in 2023 is $6,112. The Republic of South Africa is the world's largest exporter of gold and platinum.Tourism is also a key source of foreign currency.Sales to foreigners
The number of non-residents buying homes has decreased in recent years, although real estate in South Africa is now significantly cheaper for foreign buyers than it was a decade ago.
Even taking into account the recent increase in the rand rate against the background of higher metal prices, from January 2011 to October 2024, the local currency exchange rate against the US dollar decreased by about 60%, falling from 1 US dollar = 6.943 rand to 1 US dollar = 17.586 rand.However, the share of foreign buyers of apartments and houses in South Africa is only 3.74% of the total, well below the peak of 6.5% in 2008.
The demand among foreigners has decreased for several reasons:
- Weak investor expectations in relation to South Africa due to the long-term economic stagnation in the country.
- Uncertainty about the country's future economic policy.
- Negative news, such as the downgrade of the credit rating to "junk status".
The majority of non-local property owners are Europeans, mainly from the UK, as well as Germany, Italy, Holland and France.There are also buyers from African countries such as Mozambique, Zimbabwe, Angola, Cameroon and Nigeria.
According to Craig Hutchison, executive director of Engel &Völkers in South Africa, some investors from China and Dubai are also eyeing facilities in Kwazulu-Natal Province and the city of Durban.
Foreigners can own real estate in South Africa without restrictions.However, all funds transferred to the country must be declared and documented.
Non-resident investors are required to pay capital gains tax when they subsequently sell their apartment or house.
Source: Global Property Guide
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South Africa. Features of the country and the real estate market
