Low Demand for Buy to Let Property

April 16 - While there has been cautious optimism about an improvement in the state of South Africa's property market, the FNB pointed out that this trend has not been seen in the buy-to-let sector.

The majority of the houses purchased in South Africa today are for primary residential reasons, meaning that the buyers will move in to live themselves.

Those who are able to buy property for investment purposes are thus categorized in the 'luxury' category of the market, which has not seen a comeback on the same scale as the rest of the market.

FNB said that demand for buy-to-let properties dropped from 13% in the first quarter of 20009 to 9% in the first quarter of this year.

Nevertheless, FNB Home Loans Property strategist, John Loos, did not believe that these statistics would affect the overall recovery of the market.

Loos also said that he was not surprised that the recovery of the buy-to-let market was going slower than the rest of the market.

Financial pressures meant that the vast majority of South Africans have little disposal cash, and certainly not enough to purchase extra homes.

"For many would-be investors, therefore, having to fund the difference between rental income on a property and a bond repayment for the next few years of ownership remains an unattractive prospect," he said.

"Agents are indicating that in most cases such a 'top-up' would be required, with survey respondents estimating that on average on 65 percent of a bond is covered by rental income," he added.

On the other hand, a strong buy-to-let market could actually boost the market considerably, according to Loos.

4/16/2010 11:54:55 AM