The August Property Investment Tracker from Assetz claims that South Africa is currently a high-risk investment prospect, with capital gains growth, which hit 24.6% last year, likely to slow over the coming months.

The report claims that rental yields in South Africa have fallen over recent months from 10% to as low as 4.5 – 5%, as a result of house prices doubling. Now, with high mortgage rates of 9%, rental income will fail to even make a profit for investors in South Africa, leaving mortgage and management costs to be covered by the investor’s own pocket.

Total returns on cash invested currently stand at 40%, but with a hefty deposit of 50% of the purchase price required, along with the prospect of negative rental profit and slowing growth rates, South Africa is currently a high-risk investment zone.

Stuart Law, Managing Director of Assetz comments: “Trouble is looming in South Africa, with an oversupply of high-density apartments combined with a decrease in demand for rental space over the last few months.

However, not everyone is so negative towards South Africa as an investment destination. Dan Johnson, director of TheMoveChannel.com, said: “I take Stuart’s point that the low rental yields and lack of mortgage leverage in South Africa will rule it out for many investors. But in places such as Cape Town, demand for central new developments is still strong, with projects selling out at, or soon after launch. And when you consider that it is one of the pre-eminent cities on the continent, prices have still got a long way to catch up with comparable destinations elsewhere. So I believe that capital growth is likely to remain pretty buoyant for the foreseeable future and investors who pick their projects wisely will do very well.”