Dawie Roodt’s advice about buying property in South Africa

Dawie Roodt

Renowned economist Dawie Roodt said buying property in South Africa is not a particularly good investment, but it has other benefits which make buying a house enticing.

An analysis by Daily Investor showed that over 50 years, investing in gold or equities produced a far better return than investing in South African property.

Roodt told Salaamedia that buying property in South Africa has many pros and cons.

One of the biggest positives of buying property is that the value typically increases at the rate of inflation. “If you want to hedge against inflation, property is a good option,” he said.

Another benefit of investing in property is that you can use gearing. Simply put, you can borrow money against the property.

“You can use the bank’s money to buy a property and maintain its value in terms of inflation,” Roodt explained.

Another benefit, albeit subjective, is that you can stay in the property that you own. “You need to stay somewhere, so why not buy the place you are staying in,” he said.

Property, like a holiday home, also has personal advantages like bringing the family together or the feeling that you own something you like.

However, Roodt said buying property as an investment is also associated with many negatives.

The first is that the transaction cost associated with buying property is very high. “Buying and selling property is much more expensive than other asset classes,” he said.

Owning property also comes with many expenses. These expenses include rates and taxes, maintenance costs, and levies.

When buying a property for rental income comes with its own challenges. “Collecting rent from tenants is not always easy or guaranteed,” he said.

Roodt said considering all these factors, property is not a good option from an investment point of view.

“I would rather go for something else. If you want to invest in property, rather put your money in a listed property stock,” he advised.

Many property companies are listed on the Johannesburg Stock Exchange (JSE), including Attacq, Balwin, Fortress, Redefine, and Growthpoint.

He highlighted that getting a big bargain may change the picture. However, generally speaking, Roodt is not a fan of investing in property.