South Africa benefits from tourism

Owners of rental property in South Africa are benefiting from a strong tourism sector and as prices start falling more interest is anticipated.

Official figures show the number of visitors to South Africa rose by nine per cent last year and this year are expected to rise by a similar amount as the government encourages more visitors in the run up to the 2010 football World Cup.

'Buy to let investors have seen an increase in occupancy rates and rental yields. Visitor numbers are strong and the arrival of the World Cup tournament will keep global interest high,' said Yan Johannsen, a property consultant based in Cape Town.

South Africa's government wants to attract ten million foreign visitors a year in the run up to the World Cup which is being held in South Africa for the first time.

Lower house prices are expected as the credit crunch starts to have an effect, according to South Africa's Standard Bank. In 2005 South Africa was one of the fastest growing property markets in the world. But now analysts believe recent overvaluation means it cannot go unaffected by global economic conditions.

'We anticipate a large decline in demand for residential property as we enter a period of national house price deflation which we see as a correction in house prices to more plausible levels,' a spokesman said.

'This trend will be exacerbated by rising inflation and higher interest rates in an environment of record high household indebtedness,' he added.

Figures from marketing insights company, Knowledge Factory, indicates that the slowdown is already biting. They are, however based on sales and do not take inflation into account.

They show that Johannesburg enjoyed a price growth rate of 21 percent between 2006 and 2007, but that this tapered off dramatically between 2007 and 2008 to -17 percent, indicating an end to the city's property boom.

Johannesburg has, to a large extent, led the national property boom of recent years,' said spokeswoman Veronique Kotzé. 'So it is natural that it should also be the first city showing a downward trend.'

Pretoria and Cape Town also slowing down. Pretoria has been experiencing the same type of growth as Johannesburg, but not quite so acutely. The city enjoyed a 14 percent price growth rate between 2006 and 2007, which also dropped between 2007 and 2008, down to 4 percent.

'Pretoria has always fluctuated less and been more stable than Johannesburg,' said Kotzé.

Cape Town's property price growth rate is also slowing down and suggests that the property boom is tapering off there too. The 2006 to 2007 growth rate of 22 percent dropped to 6 percent between 2007 and 2008. Nonetheless, the city continues to offer the highest median values for property across the country.

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