More South Africans buying rental homes to make money

Home loan applications for buy-to-let properties have increased. Picture: Andrea Piacquadio/Pexels

Home loan applications for buy-to-let properties have increased. Picture: Andrea Piacquadio/Pexels

Published Jul 26, 2023


More South Africans are starting to place their hope in property investment for income generation and wealth creation, with the average age of these buyers dropping to 34.

The Western Cape in particular, is seeing high levels of home loan applications for buy-to-let homes, with the Free State and northern regions of Pretoria and North West province also recording stronger demand.

Last month, ooba Home loans’ bond applications for investment/buy-to-let properties reached 10,9% of the total applications nationally – the highest percentage recorded since February 2009.

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Coupled with this, the income levels of first-time property investors has also increased, recording 15,9% growth this year, compared to 10,7% and 9,8% in 2022 and 2021 respectively.

The data shows that the gross income of all applicants during the first half of this year averaged R57,568. Interestingly, the gross income of first-time property investors was significantly higher – averaging R87,105 for the same period, the bond originator states.

Ooba chief executive Rhys Dyer says the primary driver behind the national increase is the Western Cape, which saw applications for investment properties surge to 30,4% of total applications in June, comfortably exceeding the previous high of 21,5% in March 2020.

Other regions recording stronger demand in the last month were the Free State, where 8,3% of applications were for investment properties, and the northern regions of Pretoria and North West province, where, collectively, 5,2% of applications were for buy-to-let homes.

He also reveals that, surprisingly, the average price paid by first-time homebuyers for an investment/rental property has, in recent years, exceeded that of first-time homebuyers overall.

“We attribute this to the perception of residential property as a sound investment opportunity and the aforementioned improvements in income levels.”

Also noteworthy is the average age of first-time investment property buyers, which has been going down since 2019. That year, the average age was 41, but this year it is 34.

“This is in-line with global trends as younger homebuyers prioritise homeownership as a strategic tool for wealth creation and financial security,” Dyer explains.

A post on Kasi Hustlers – a Facebook page that aims to educate, inform, and empower small business owners in the townships, yesterday asked its 468,000 followers what types of businesses they would start, if they could start another. There were 1,200 replies to the questions, the majority stated that it would be “property”, either property investment or development.

Offering advice to aspiring property investors, Richard Gray, chief executive of Harcourts South Africa, says success in this sector is not about quick wins; it's about knowing your market, staying informed of trends, and making strategic, data-driven decisions.

Sustainability and future growth should be key considerations when buying an investment property.

“Look beyond the immediate appeal. Consider the long-term prospects of the area, potential for infrastructure development, and property's potential for value appreciation."

He also emphasises the importance of diversification, saying you should not put all your eggs in one basket.

“Consider diversifying your portfolio across different types of properties and locations. This strategy can help mitigate risk and offer more stable returns."