South Africa property investment becoming more attractive


South African property is becoming attractive to investors, according to the Tenant Profile Network Credit Bureau.

The rise in popularity is not stimulated by a strong economy or rising house prices, though, explains the Bureau. Rather, it is the negative market conditions that have boosted the potential yields on the country's real estate.

Indeed, investors should focus on the income stream rather than the property price.

"When it comes to property as an investment it is actually the income stream that it generates, relative to the price paid, that should really be the focus," Managing Director Michelle Dickens told eProp . "In investor speak, a far better number to focus on would arguably be the "initial yield", i.e. the income expected to be earned over the next year divided by the property value."

"However, weak house price growth that  underperforms rental income growth is actually what is required to improve the attractiveness of property as an investment in future, through leading to a higher yield."

The experts predict this to continue all the way through 2013 as well.

"More of the same", they tell eProp, with mediocre rental inflation in a weak economy still managing to beat even weaker house price growth by a small margin, translating into further rise in the national average gross initial yield on residential property.

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