Real estate has long been considered a cornerstone of financial stability, with many viewing it as one of the safest investment options.
The South African Reserve Bank’s Monetary Policy Committee (MPC) decided in November 2024 to cut the repo rate to 7.75% and the prime lending rate to 11.25%. The decision to cut rates was unanimous.
Many prospective buyers view this second consecutive cut as a potential turning point for the property market, offering some relief after years of high borrowing costs.
However, despite its reputation as a stable asset class, buying property can come with significant risks, particularly if the wrong choices are made.
Arnold Maritz, Co-Principal at Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs, emphasises the importance of discernment in property investment.
While property can offer considerable financial rewards through capital appreciation and rental income, Maritz cautions that not every house is a sound investment.
He identifies eight key red flags that could indicate a property is not worth buying.
Structural issues are a critical concern. Significant problems, such as foundation cracks, sagging roofs, or uneven floors, can result in costly repairs over time.
Even if these issues are not immediately evident, they often worsen, potentially turning a once-promising property into a financial burden.
A thorough inspection by a certified professional is non-negotiable for any prospective buyer.
Water damage and drainage problems also merit close scrutiny.
Issues like ceiling stains, a musty odour, or poor yard drainage can signal deeper concerns, including mould growth and structural deterioration.
Addressing these issues can be expensive, and they may even lead to health complications, making it essential to identify and address them early.
Location remains one of the most critical factors in real estate.
Properties in areas with high crime rates, poor infrastructure, or proximity to disruptive elements like busy highways or industrial zones can be harder to resell and may lose value over time.
A neighbourhood’s desirability often correlates with the presence of amenities such as schools, supermarkets, and recreational facilities.
Older homes, while often charming, may hide outdated or hazardous electrical systems.
Homes with old wiring or overcrowded breaker boxes pose safety risks and may not comply with modern standards, potentially requiring extensive and costly updates.
Similarly, poor-quality or outdated building materials, such as asbestos insulation or ageing plumbing systems, can necessitate substantial investment to bring the property up to code.
Signs of neglect, such as peeling paint, overgrown landscaping, or broken fixtures, often point to a lack of maintenance.
Such visible issues may hint at deeper, hidden problems, indicating that previous owners might have deferred essential repairs due to financial constraints.
This deferred maintenance can lead to significant expenses for new homeowners.
Overpricing is another major pitfall. Paying above market value for a property can leave buyers with little equity in the early years of ownership, increasing financial vulnerability during market downturns.
Prospective buyers should research comparable properties in the area to ensure the asking price reflects fair market value.
Unapproved renovations or additions can create legal and financial complications.
Home improvements made without proper permits may fail to meet safety standards, leaving new owners liable for costly compliance measures.
Buyers should verify that any significant changes to a property were completed in line with local regulations.
Following the MPC’s decision to maintain the current interest rate, property experts have expressed cautious optimism.
While the steady rate may encourage some buyers to enter the market, others remain concerned about the broader economic challenges, including inflation and stagnant growth.
Experts urge potential buyers to proceed with care, prioritising due diligence and ensuring their purchase is both financially and practically sound.
As Maritz notes, while the allure of a beautiful facade or a breathtaking view can be tempting, property investment requires a level-headed approach.
By identifying potential risks and red flags, buyers can make informed decisions, minimising the chances of turning their dream home into a costly misstep.
In a market where conditions are evolving, careful evaluation remains the key to long-term success in property investment.
