Fixed property remains one of the most favoured forms of investment amongst South Africans even though it has lagged behind other asset classes over the past five years or so.
This emerges from the latest survey of money matters within the South African middle class commissioned by Visa. The broader survey results reveal worrying trends and mainly poor investment which seems to be a result of high levels of indebtedness amongst South Africa’s middle class.
The VISA report said when asked what assets they own, 52% of respondents said property, the highest of any asset class. This was followed by fixed income deposits (37%), shares (25%), bonds (9%) and private equity investments (8%). Six percent of respondents said they invested in commodities, alternative investments such as art (3%) and hedge funds (2%).
The report said “Alarmingly, 20% have no investments whatsoever”.
When asked on what assets are most likely to make them wealthy, 53% said property. Seventy percent said they had one property, 12% said they had two, while 3% owned 2 or more. This was followed by shares and owning your own business, both at 15%, commodities at 8% and private equity investments at 4%.
Traditionally property has been seen as reliable investment throughout the world. That is partly because but bricks and mortar appeal to the basic human instinct. Many people trust an investment they see, touch and feel. This may be surprising because property returns have been squeezed over the past five years or so with residential property dipping into the red. However property does provide inflation beating returns in the long term.
Visa said the report surveyed 2000 people across the country who have household financial decision-making responsibilities. “The report was designed to uncover attitudes and behaviour toward money matters and identify areas where South Africans are putting themselves at risk”.
- 52% say they’ll never be financially free
- R7283 is the average amount spent paying off debt each month
- 65% think the global economy will stay the same or get worse in next 5 years
- 20% think the Rand will dramatically depreciate over the next 5 years
- 27% feel that the political leadership in South Africa rather than the crime (17%) is a pressing issue that requires attention and resolution.
- 52% currently own property, 64% say that they will have paid off their house by the time they retire.
- 29% say that their level of debt is the single biggest threat to their wealth
- 20% have no investments at all, 19% saving zero for retirement
- 53% say property is the asset most likely to make them wealthy
- 15% do not plan on ever retiring; but 85% of those who are planning to retire are currently saving for their retirement
- 32% are most likely to look to a financial advisor first when investing in a new asset. 21% would look to their spouse or partner for advice first
- 71% are planning on leaving an inheritance for their family. Only 2% plan on not leaving any inheritance at all
- On average, those who give to charities give R5 843 every year
- 13% of these individuals plan on retiring outside of South Africa
- 94% say good education more important than leaving their children an inheritance
- The majority (58%) would pay off all their debt if they won R5 million