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More South Africans are buying second properties, especially those living in Gauteng

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More South Africans are buying second properties, especially those living in Gauteng

A considerable amount of the property purchases were made in lower-priced rental properties, with 20.6% of the purchases made for properties priced at less than R500 000 and 24% for properties priced between R500 000 and R1 million.

FNB Private Bank Lending Chief Executive, Praven Subbramoney says this data mirrors the trend currently seen in the broader property market regarding the increase in secondary property buying in the more affordable segments driven by middle and high-income earners who are taking advantage of low borrowing costs and well-priced properties.

In addition to low-interest rates, the increased demand can be attributed to the savings customers made from not paying student accommodation during the lockdown period and the trading down in this market due to decreased demand.

 

Clients purchase additional properties for various reasons,

primarily for rental and holiday purposes. For rental property purchases, the buyer

typically looks at properties that fit within their financial management journey and wealth

creation aspirations. Having said that, student accommodation purchases as well as

sectional title properties are in demand due to their lock-up-and-go nature and lower

maintenance costs.

“What has also become prevalent is the upward trajectory in investing in this type of

property due to the energy and water-saving solutions which put money in the investors’

pocket. Coastal properties are also preferred for people looking for holiday homes and

with the advent of Air BnB, it has made it easier for these individuals to also earn rental

income on their holiday homes,” says Subbramoney.

“Building your property portfolio as an investment can be an effective money

management tool when used correctly, and in turn cultivate into a wealth creation

opportunity for you and your family for generations to come. For our clients, owning more

than one investment property can be used to speed up their wealth creation goals and

further achieve financial freedom through multiple sources of income,” says Eric Enslin,

CEO of FNB Private Wealth and RMB Private Bank.

READ | How to start your own property portfolio (with as little as R10k)

Of those who bought secondary properties in 2020 and grew their property balance

sheets, 52% were male, and 48% were female. With this said, Enslin states that the

broader home buying picture, still depicts that women dominate the home buying market

by a remarkable 53%, especially in the first-time home buyers’ market.

Research shows that people are starting to acquire assets such as cars and properties at a

younger age. BetterBond’s average age of first-home applicants is 36, and research by

TPN shows that much of the investor activity is happening in this age group, starting from

the mid-twenties. This is also a time when many are starting to earn good salaries, and

their spending power is starting to increase.

With the prime lending rate dropping to a record low of 7%, home buyers are now able to
afford 30% more than they were at the start of 2020, when the prime lending was at
10%, adds Carl Coetzee, CEO of BetterBond. Coetzee says BetterBond is seeing the uptick
of bond activity in its application volumes, which increased by a record 53% in December
– traditionally a quiet period. The trend is continuing into 2021, with a 46% increase in bond applications for March.

More multiple properties buyers in Gauteng

From a regional point of view, 34% of secondary properties were purchased in Gauteng,

22% in the Western Cape and 9% in the KZN, mirroring the economical and job activity in

these leading provinces.

“Property represents a stable investment which will grow over time and serve as a wealth

creation tool for you and your family for future generations to come. If you are looking to

enter the properties market for a secondary properties, remember that property is a long-

term investment that comes with monthly costs. Before making the commitment, it is

always worthwhile to consult experts who will be able to assist you in the process of

turning your property into an investment and advise you on a strategy that will positively

impact the growth of your portfolio,” says Subbramoney.