South Africa’s 153 000 private residential property investors**, who own 460 000 properties, appear to be losing their appetite for growing their portfolios.
Lightstone’s assessment of data from 2006 until 2021 shows year-on-year growth in investor volumes, which levelled off in 2022 and went down in 2023 and into 2024. It is, of course, too early to call the decline of investor volumes a trend, and we will be keeping an eye on the data as the year moves to a close.
Investor property volumes peak in the R750 000 to R1 500 000 value range while 46% of investment properties are not currently bonded. Currently, 7% of metro residential stock and 4% of non-metro residential stock is held by private investors, with volumes flat (0% growth) on pre-COVID times.
Number of private investors by year
Roughly 60% of the 153 000 investors own three properties, 20% have four properties, 10% five properties and 10% six or more properties.
The vast majority (70%) of investment properties have only one investor involved and almost none (0.7%) have more than two.
Residential properties account for 87% of investments, with just 13% not classed as residential, most of which (75%) are in non-metro areas pointing towards likely agricultural usage or intent. The volumes of these investor held non-residential properties have dropped by a significant 8% post COVID.
Are Cape Town investors selling to capitalise on higher prices?
There has been a significant decline of natural person owned investment stock in non-metro areas since 2019, and especially stock not classified as residential, while investment stock is slightly up in metro areas on 2019 numbers..
Investor activity has flattened in Cape Town, while Johannesburg and Pretoria (+2%) and Durban (+1%) have grown.
However, volumes can drop as falling rentals push investors to sell – likely the case in the decline in non-metro areas – or they can rise as investors want “in” to an area that is attracting interest, or because investors mop up properties sold inexpensively under pressure.
It is highly probable that the lack of investment property in Cape Town is driven by stock shortages pushing house prices up, and offering investors an attractive exit on their investments.
Sectional Title popular with investors
Investor interest in Freehold properties located in Estates has waned (-4%) and attention has shifted to Sectional Title units within these Estates (+4%), which are preferred over Sectional Title within traditional walled non-estate complexes (-1%).
However, 16% of Sectional Title properties within traditional residential complexes is in private investor hands, indicative of this category’s popularity with investors.
** Investors who are natural persons owning three or more properties purchased (as opposed to inherited), for R100 000 or more in today’s monetary terms.
