Is Your House An Investment?

With growth of inflation plus 3% over the past 15 years, your house has definitely been more than just a roof over your head. But it is also important to ensure that it is not your only investment.

- Schalk Louw

South Africans like to consider their homes to be an investment. But as with all investments, it is worth revisiting your assumptions from time to time. At the moment there is a lot of debate about the prices of properties, especially residential ones. The FNB South African House Price Index shows us that house prices have declined by 21% in real terms since August 2007. This leaves countless individuals on the edge of their seats, waiting for the appearance of possible “bargains” in the residential property sector.

But the reality is that it is not about how high or low these prices are, it is about whether the South African public can actually afford to buy these properties.

Salaries have not increased by much more than inflation since 2007, which means that it will take young South Africans much longer to reach the point of being able to afford their first properties, and when that day finally comes, the debt ratio will be so high that they will have much less to save.