The type of urban property investment that offers the greatest potential of wealth creation for the private investor in South Africa

Abstract

There are several different investment opportunities for the private investor in South Africa in the asset class of immovable property. The purpose of this study is to identify the category of investment within this asset class that produces the most wealth creation. Four broad property investment categories exist. There are speculative investments involving short-term high profit returns. There are also long term income producing investment options. Property development is another category although there are often limitations in terms of financial accessibility for private investors. Finally there is the category of investing in listed property through property shares or unit trusts. Each category can be further segmented into property types such as residential, commercial, industrial, or undeveloped land. Each property type produces different returns and levels of profitability but is also affected by specific risks and externalities. Recent growth in the South African property market has caused a flood of private investors to enter the property market. Many of these investors lack knowledge of their asset purchase. This may be in terms of the potential financial return of their particular asset choice, or the variables and risks involved. Many potential investors feel that property investment is inaccessible to them and that it is reserved exclusively for the wealthy. This study undertakes to evaluate the category and type of property investment that offers the greatest potential for wealth creation for the private investor through research and calculation. It also serves to establish the profile and perceptions of potential private investors with respect to the different property investment options available to them.