One province South African property investors are ditching

Property investors in South Africa are turning towards provinces like the Western Cape, Gauteng, and the Eastern Cape but leaving behind KwaZulu-Natal.

This province has seen its appeal decline as a result of environmental and economic challenges.

This is according to data from Standard Bank, which explained that new property investment trends are emerging in South Africa as investors tap into the growing demand for coastal homes and look beyond traditional rental models to build wealth.

Interestingly, Standard Bank revealed that one in eight mortgage applications nationally over the past year were for buy-to-let properties.

The Western Cape has become a prime location for property investors, with 31% of new home loan applications in the province linked to buy-to-let ventures, which is more than double the national average of 12%.

“Over the past decade, the Western Cape has consistently positioned itself as an investment destination,” said Standard Bank’s head of personal and private banking, Chiko Manokore.

“Areas like Cape Town have benefitted from consistent demand driven by tourism and a growing expat community.”

Interest in bed and breakfasts and independent homes within estates has significantly increased, especially in the past five years.

Additionally, the province ranked second, after Gauteng, for the number of building loans issued by Standard Bank, with a considerable portion being utilised by buy-to-let investors.

“You are seeing more uptake for large estates, lots of bed and breakfasts and interestingly a growing number of people building multiple properties in a single stand,” Manokore added.

Gauteng, South Africa’s economic hub, continues to show strong buy-to-let activity, too, nearly double the national average.

Tshwane is leading in this regard, and the province’s rental market is driven largely by investors seeking additional income streams.

“In Johannesburg, property investment tends to focus more on rental income, unlike the Western Cape, where short-term rentals are particularly popular,” Manokore explained.

The Eastern Cape has also become a significant player in the buy-to-let market, attracting more property investment than the national average.

However, KwaZulu-Natal experienced a decline in buy-to-let activity over the past year, with only 6% of home loan applications in the province associated with property investment.

“KwaZulu-Natal unfortunately has lost some speed, especially in the last few years, because of the many challenges it has faced,” Manokore said.

“Environmental setbacks such as floods and the 2021 riots have impacted investor confidence.”

According to the United Nations Office for Disaster Risk Reduction (UNDRR), the floods in KwaZulu-Natal in 2022 caused an estimated R7 billion in damage to 826 companies, many of which were tourism-related.

These floods also disrupted operations at King Shaka International Airport, a vital resource for the tourism industry.

In June 2024, a tornado and cut-off lows – isolated pockets of cold air in the upper atmosphere that tend to move slowly and can release significant amounts of rainfall in one place – resulted in further destruction of holiday homes in KwaZulu-Natal.

The weather has disrupted air traffic between Durban’s local and international airports, causing domestic and international flights to be diverted, which is quite costly, UNDRR explained.

Additionally, the port of Durban has suffered damage from floods, affecting cruise ships and yachts.

Severe weather events have been on the rise across South Africa, with data from Old Mutual Insure showing that they have increased in frequency from 6 to 36 per decade since 2012.

The Western Cape and KwaZulu-Natal were particularly vulnerable, making up more than half of the country’s severe weather events in 2023.

As a result, some insurers have started withdrawing from high-risk areas like KwaZulu-Natal, which are extremely vulnerable to flooding.

This means that the province is becoming an increasingly dangerous place for investors to buy property.