House prices in South Africa have risen faster than anywhere else in the world — by 244% between 1997 and 2005. Yet again, canny sun-loving Brits were a big force behind soaring house prices. Drawn by the unspoilt beaches, relatively low house prices and attractive coastline — and although it is almost an 11½ hour flight to Cape Town, it is just an hour ahead of Greenwich Mean Time.

Traditionally, the most popular properties have been lock-up-and- leave houses on gated golf course complexes around Cape Town, towns on the Garden Route and in the Cape wineland. In the past two years, new hot spots included the Wild Coast, near Durban, and KwaZulu-Natal.

Such price growth has not been sustainable, however. Prices rose 30% in 2003, but only 15% last year, says property investment specialist Assetz, which predicts 10% growth for 2006.

“Trouble is looming,” says Stuart Law, Assetz’s managing director. “Rental yields in South Africa have fallen from 10% to as low as 4.5% to 5% in 2005, as a result of house prices doubling. Rental income will fail to make a profit for many investors.”

So is South Africa still a good investment? Foreign investors have to put down a minimum 50% deposit and are encouraged to take out a local mortgage. Rates are high, at 7%, and due to rise again this year.

William Collins, a senior dealer at Currencies4less, a foreign-exchange company, points out: “Due to exchange-rate fluctuations, the same house that would have cost £56,800 in 2001 would now cost £93,000.

“South Africa is now considerably more expensive to invest in than at any time since September 2000. It remains to be seen whether the return on property investment in the short term will be worth it.”

Andy Collett, director of Pam Golding International, the country’s largest estate agency, is more positive.

“Although the market has slowed, there’s still sustainable growth of 10% to 15% driven by a strong South African economy, an emerging middle class and interest from the 2010 Football World Cup. Hot spots include northern Natal, Hgauteng and parts of the Western Cape.”

The latest trend appealing to the British pocket and animal-loving instincts is the environmentally conscious property resort, such as the Zimbali Coastal Resort, Gondwana Game Reserve in the Western Cape and Pezula on the Garden Route.

New signs, warning of roaming beasts, are cropping up in these South African resorts: “Do not walk after dark, even in the housing areas, as it is extremely dangerous.” Buyers would be minded to take the same advice to ensure they are not bitten by the country’s falling property market.

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