#PropertyUncut: Is property a better investment vehicle than a bank?

With interest rates being at their lowest in 47 years, the cost of loaning money from a bank, through a mortgage bond, has never been cheaper. In the property sector we use the term “gearing” which refers to the principle of utilising a loan in order to generate profit in excess of the loan amount.

A Lower interest rate means that it cheaper for you to loan money from the bank, but it also means that the return you earn from leaving your money in the bank is also lower.

Our #PropertyUncut live Q&A sessions focus on various topics within the property industry, but one point that has been emphasised is the capital appreciation benefits that come from investing in strategically positioned opportunities within a secure residential estate. These opportunities appreciate faster and also achieve a higher rental demand for investors. In the context of KZN, this would include estates within high growth areas such as Umhlanga, Sibaya Coastal Precinct and Ballito.

To illustrate this, the case study below is based on the average capital appreciation already been achieved within the one of these high growth areas, the Sibaya Coastal Precinct. Using a R3 million property as an example, the case study compares the profit that could be achieved with a 20% deposit on a R3 million home (R600 000) versus the profit earned if you were to put the money into an interest-bearing account:

R600,000 deposit on a R3 Million property 

  • R810 939 investment gain over 3 years.
  • 76% return on equity

*Based on a fixed interest rate of 7. 25% over 3 years

*Capital appreciation on the property of 7% per annum

R600,000 invested into an interest-bearing account

  • R93 993 capital gain over 3 years
  • 15% return on equity

* Based on a 5% interest rate with the bank












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