The number of homes bought by investors has fallen for the first time in almost 20 years.
New data from data and analytics firm Lightstone shows that investors snapped up more homes every year from 2006 to 2021, but purchases flattened in 2022 before declining in 2023 and 2024.
Should rental professionals be worried?
Hayley Ivins-Downes, Managing Executive Real Estate at Lightstone, said that it’s too early to call the fall in purchases a trend and that they would continue to track purchasing numbers.
The fall in investment could well be temporary. The South African Reserve Bank’s (SARB’s) recently ended cycle of interest rate rises began in November 2021, right before housing investment flattened in 2022. Interest rates then continued to rise to a 15-year high in 2023 and 2024, putting off first-time buyers and investors alike from buying property.
After SARB made its first cut to the prime lending rate in September, economists expect another 25 basis point cut later this month. That would leave the prime rate at 11.25%, in line with where it was in early 2023.
It would not cause much of a reduction in the cost of borrowing – less than R200 a month on a bond of R1 million – but as interest rates continue to fall, more investors could be tempted back to the market.
And if the falling cost of borrowing doesn’t encourage investment, the rising returns on rental investment might. According to the PayProp Rental Index, rental growth is the strongest it has been since 2017, and with falling inflation, real-terms growth is accelerating.
The sector that’s beating the trend
While investment is down overall, investors bought 4% more sectional title properties within estates than in 2022, also receiving more interest in walled non-estate complexes. Renting out sectional title properties comes with unique challenges for landlords and rental agents, but they can also be secure investments that are popular with tenants.
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