Sameera Casmod | sameerac@radioislam.co.za
16 August 2023 | 10:32am SAST
1-min read

Picture: Property24

As economic challenges continue in South Africa, concerns arise about the implications for property investors and tenants. An interview aired on Radio Islam International with property economist Erwin Rode sheds light on the complex landscape facing real estate stakeholders in the country.

The interview delves into the multifaceted issues affecting the property sector. Rode addresses the confluence of economic hardships, load shedding, crumbling infrastructure, and regulations that some claim are tilted in favour of tenants and against landlords.

Amidst these challenges, the question of whether property investment remains viable emerges. The downward trajectory of rental incomes, driven by a sluggish economy and inflation, raises doubts about the profitability of real estate ventures. Rode projects that this decline in real terms could persist, leading to a potential downturn in property values over the next five years.

Rode’s analysis is grounded in the notion of “negative gearing,” wherein returns on investment fall below interest rates. With high interest rates projected to persist for an extended period, prospective buyers may find themselves caught in a financial predicament. In such circumstances, buying property might not be the lucrative venture it once was.

However, Rode acknowledges the psychological value of homeownership, especially in challenging economic times. While financial prospects might be dim, the stability and permanence that owning a home offers could outweigh strict investment considerations.

Rode presents a strategy to use when deciding between renting and buying: while monthly payments could be high when buying a house, renters might pay considerably less in monthly rent. By diligently saving the difference between the rental cost and the mortgage payment, disciplined individuals could amass a substantial savings amount over a period of five to seven years.

For those who already own property assets, Rode offers pragmatic advice. While selling property might not be the optimal solution due to associated transaction costs and logistical challenges, maintaining properties in excellent condition can position owners to extract maximum value when selling becomes more feasible.

Listen to the full interview on Sabaahul Muslim with Moulana Sulaiman Ravat.