For most, the dream is to own their own home.

Property has been regarded as a good investment due to it being a tangible asset that generally appreciates over time, so it makes good financial sense to buy property.

This is according to Claude McKirby, Co-Principal for Lew Geffen Sotheby’s International Realty in Cape Town’s Southern suburbs.

Having a place to call your own and financing your own investment rather than your landlord’s is appealing on numerous levels. Plus there is the satisfaction of owning an investment property.

"And, when chosen wisely, a property can yield significant returns, either by rising in value or generating rental income. Additionally, it can be an effective hedge against inflation, providing security even in uncertain economic climates," McKirby said.

"However, real estate is not a minor investment and it’s also a major financial commitment, so the decision to purchase property is not one to be taken lightly, especially as the market can fluctuate due to numerous factors."

Here are several key factors that potential buyers should consider and understand before taking the leap

Assess your personal finances

Before embarking on a property search, McKirby emphasises the importance of thoroughly assessing your financial situation, as property is a long-term investment. Establishing a solid financial foundation will empower you to make informed decisions with confidence.

It can also be helpful if you obtain pre-approval from a bond originator as this will give you an idea of how much you can afford and your chances of obtaining finance.

Deposit and savings

Most banks require a deposit of around 10% to 20% of the property's value. Plus, there are often other costs to consider, including transfer duties, bond registration fees, and legal costs, which can add another 5% to 8% to the total price of the property.

If you don’t have the savings to cover these costs, you might need to delay your purchase until you have built up a sufficient nest egg. Even though you can afford to buy, if you stretch yourself to the financial limit that leaves no wriggle room should anything unforeseen happen.

Debt and credit score

Your credit score plays an important role in securing a bond and getting a competitive interest rate. If your credit score is less than ideal, you may want to focus on improving it before applying for a home loan.

"Additionally, assess your debt-to-income ratio. Lenders typically prefer that your monthly debt repayments (including the bond) don’t exceed 30% of your monthly income. If you are carrying high levels of debt, it might be wise to address that before committing to a property purchase," McKirby said.

Interest rates in 2025

McKirby said: "Interest rates are one of the most critical factors affecting your mortgage repayment amount, and in recent years, South Africa has seen significant fluctuations in with record lows followed by significant hikes when The South African Reserve Bank (Sarb) raised rates in 2023 to curb inflation.

Currently, interest rates are declining, and with ongoing political stability and relief from load shedding, financial experts anticipate further reductions in the repo rate as inflation stabilises. This trend is encouraging for those considering property investments in 2025.

Market conditions

The SA property market is influenced by several global economic factors and local dynamics and, in recent years, the market has been under pressure due to slower economic growth, rising costs of living, and high interest rates and inflation.

"However, we seem to have turned a corner and the investor sentiment is cautiously optimistic."

Supply and demand

McKirby said that with semigration still steady, they are seeing a lack of sufficient housing supply to meet the growing demand, particularly in urban areas like Cape Town and north of Durban.

This has resulted in a notable price growth in some suburbs, putting them out of reach of many first-time buyers however there are still opportunities to buy in up-and-coming neighbourhoods where prices have not yet peaked.

On the other hand, some areas have seen slower price growth or even a decline due to factors including oversupply, socio-economic trends, or a drop in demand, this means that researching the local property market in the specific area you are interested in is crucial.

Keep an eye out for trends, talk to real estate agents, and even consider emerging locations that might offer more value for money.

Government initiatives and policy

"Keep an eye on any policy changes, such as tax adjustments, land reform, or changes to property laws, as these can influence property values and purchasing conditions," McKirby said.

Staying informed will help you make a more educated decision about whether the market is favourable for your particular needs.

Long-term investment goals

One of the major reasons to buy a home is to build long-term wealth, according to McKirby,

Property in South Africa is generally viewed as a sound investment, particularly in prime areas with good growth potential. If you’re considering buying a home, it’s essential to think about the long-term value of your investment.

Capital growth

If you are buying for investment purposes then focus on areas where you can expect long-term capital growth.

McKirby said: "While short-term fluctuations in the market can occur, property generally appreciates over time so look for areas with improving infrastructure, proximity to schools, transport links, and business hubs, as these factors tend to drive demand and increase property values."

Renting out your property

Another option to consider this year is the potential to rent out your property.

Given the high rental demand in urban areas, especially in cities like Cape Town, Johannesburg, and Pretoria, along with declining interest rates, you have the opportunity to generate rental income while your property appreciates in value.

"This strategy can help offset your mortgage payments and make your home a more profitable investment in the long run," McKirby said.

Is your timing right?

Consider your personal circumstances and ask yourself the following question: are you ready to commit to a home for the next five to ten years?

Also consider your job stability, family needs, and whether you’ll be staying in the area for an extended period.

If you are uncertain about the timing, you could wait until you have built up more savings, have a clearer picture of interest rate trends, or see more favourable market conditions in the future.

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