The number of applications for investment property loans is at its highest level in 15 years, according to Oba data. Applications for investment property loans typically make up about 4-5% of mortgage applications. However, this figure has jumped to 11.8% of domestic applications, nearly three times the demand for investment property loans.
While the national rate has increased, the Western Cape has seen a significant increase in investment property loan applications, currently at just over 28%. This means that nearly one in three mortgages filed in the state is related to investment property.
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Sentinel Homes' Dr. Renier Kriek said current data is skewed by rising costs of living due to inflation and high interest rates, as well as reduced participation from homebuyers who are hesitant to buy due to uncertainty surrounding the upcoming election. He said there may be. . This may result in a higher proportion of investment applications.
“Even so, it also shows that despite the economic pressures, real estate investors remain confident, active in the market and resilient. “In this political climate, real estate investments may be seen as safer,” Creek said in a statement released by the mortgage company.
Explaining the rapid increase in real estate investment
One factor is the ongoing migration trend of South Africans moving to areas with better infrastructure and service provision.
“This is particularly true in the Western Cape, where new property development has lagged behind the inflow of semi-subsidized funds,” the statement said.
“Many people who come to this state are renting while they are looking for a new home or while they are building a home.”
Another factor is the return of tourists to Cape Town, which remains one of the world's top holiday destinations. Investors are purchasing prime properties that can be rented out as short-term leases or vacation accommodations.
Increased rental demand and improved rental real estate performance, including fewer vacancies and tenant defaults, have led to a surge in investment applications.
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Why real estate investment is not booming in Gauteng
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While Western Cape statistics are particularly lively, the same cannot be said for Gauteng.
Mr Kriel told Moneyweb that demand for residential property in Gauteng was also affected by semi-migration, but in the “opposite direction”.
“Gauteng's rental market is not as robust as the Western Cape, with vacancies and payment defaults higher than the national average.”
But Kriel said Gauteng remained a “powerhouse” in the residential property market, with 35 per cent of residential properties located within the province, compared to 18 per cent in the Western Cape.
Kriel also points out that the residential real estate market is currently attracting “smart money.”
“Pentified demand, especially among potential first-time buyers, characterizes the current market environment. Astute investors and retail buyers seek value as market activity declines. doing.
“The decline in sales volumes is due to consumer anxiety over the election, the spike in interest rates, and recent relatively high inflation,” he says.
“Those who already own residential property, particularly in the Western Cape, may expect a rise in value when the dam of pent-up demand breaks, which we expect to happen with the first rate cut after the election. It will be done.”
