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Is residential property (still) a vehicle for building long-term wealth?

26 April 2022 | Insights Team

One of the largest transactions we may ever make during the course of our lives is the purchase of a home. Some of us may even be fortunate enough to experience this landmark event a handful of times. Whatever the case may be, there is usually one critical question that we all ask ourselves as we embark upon the journey to homeownership; is this a good investment and what will it be worth in 5, 10, or even 20 years?

Property is an asset

With the Covid-19 pandemic here to stay for the foreseeable future and interest rates still at relatively low levels, conditions remain favourable for savvy first-time buyers in the under-30 age group. They are eagerly jumping at the chance to exit rentals in favour of homeownership, especially as it is now possible to pay less for a mortgage bond than a rental property. This is the first step toward building financial wealth early on. Over time, with financial discipline and market appreciation, the investment will yield a return and will become an asset.

Building wealth

Additionally, with working from home now more the rule than the exception, established homeowners in the 35 to 55 age group are also taking advantage of this status quo to improve work-life balance by purchasing properties containing integrated living and working spaces and are better geared towards the new remote reality. This accounts for the increased property investment we are seeing in sought-after properties which provide the required amenities and lifestyle in desirable locations across South Africa while yielding a capital return.

Is now a good time to invest in residential property?

Despite the prevailing economic climate, surprisingly the property market has shown resilience. Pent-up demand seen in 2020 and 2021 has remained at high levels in Q1-2022 and while market appetite slowed slightly with the most recent interest rate hikes, it is anticipated that it will revert to seasonal levels. Nonetheless, as with any investment, the answer lies in increasing your knowledge and understanding of the residential property market and making sound decisions in order to reap the financial rewards.

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Insights Team

We're the "thinking arm" of Leadhome, combining expertise in data analysis, modelling, sociology, geography, and philosophy to interrogate current trends in the South African residential property market. Proudly contemplative since 2015.

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