If there is one thing that South Africans like more than watching sport and having a braai, it is the irrevocable belief that investing in property is the stairway to financial heaven. Even when the numbers tell a completely different story.
The Western Cape might be one of a handful of regions in South Africa where property investments in the last five to 10 years reaped any rewards. That is again with the focus on residential property. Structural factors as mentioned above, and the deterioration of small to bigger towns and recently even cities across the north of South Africa, have caused residential property prices to stagnate and even collapse during the last 10 years.
SA residential property: R1 million invested in the local residential property market 10 years ago, would have left you with about R800 000 in pocket today, reflecting a -20% destruction of your capital over the last 10 years. This is excluding any additional property-related costs, such as property transfer costs, maintenance, insurance etc.
S&P 500: If you have decided to externalise your assets offshore and invest a R1 million on the S&P 500 10 years ago, you would have had R3.2 million in capital today . If you further take the depreciation of the rand/dollar into account and invested the R1 million at an exchange rate of R8.50/dollar in 2012 and cashed out your investment today at R14.50/d ollar, your capital would have inflated to R5.6 million.
Another scapegoat for property owners selling their beloved homes is the increase in administered prices, which mainly refers to electricity and municipal related costs. These costs have shot through the roof in the last decade.
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