The buy-to-let picture in South Africa remains one of mediocrity, as is the case for secondary properties as a whole says\u00a0household and property sector strategist at FNB Home Loans, John Loos.<\/p>\n
The 4th quarter 2016 FNB Estate Agent Survey showed that as a percentage of total home buying, buy-to-let purchases are estimated to have declined from 10.1% in the previous quarter, to 8.55% in the 4th Quarter of last year.<\/p>\n
This points to an average of 9.3% of total home buying for the last two quarters of 2016, and continues a lengthy period of mostly single-digit percentage estimates for buy-to-let buying, stretching back to 2010, FNB said.<\/p>\n
Zooming in on South Africa\u2019s major regions, the weakest estimated major buy-to-let market in the last half of 2016 was Joburg, with a 5.7% buy-to-let buying percentage, which ties in to this city market returning the weakest activity rating estimate from the agents too, Loos said.<\/p>\n
By comparison, it was the relatively vibrant Tshwane market which returned the highest buy-to-let estimate of 14.9%. One may ask why Cape Town (12.1%), the recently strong part of the national market, had a lower estimate in buy-to-let than Tshwane?<\/p>\n
“The answer may lie in the Cape Town market\u2019s house price growth having run hard in recent years, making it very expensive while also compressing its rental yields,” the analyst said.<\/p>\n
FNB noted that the number of secondary properties owned by individuals – where someone owns more than one property – is approximately 16.2% of all the properties identified over the survey period.<\/p>\n
The bank stressed that secondary properties include those for buy-to-let purposes as well as for use by relatives, leisure purposes and other non-primary residence motives.<\/p>\n
While investment property buying levels are seen as moderate, the level of selling of such properties is also perceived as low, said Loos.<\/p>\n
FNB said it asked agents to estimate the portion of all properties sold that are believed to be investment properties being sold due to owners not earning the type of investment income that they had anticipated.<\/p>\n
For smoothing purposes, the bank said it uses a 4-quarter moving average percentage, and found that the average for the 4 quarters up to the 4th quarter of 2016 to be 3%.<\/p>\n
This percentage remains relatively low, having been as high as 10.25% at a stage of 2010, Loos said.<\/p>\n
“In short, therefore, while buy-to-let buying levels are not seen to be setting the world alight at present, buy-to-let property selling appears even more modest, which is one indication of still little in the way of financial stress in this market,” the analyst said.<\/p>\n