Rent Vs Buy: Cape Town CBD X 2

Here are two apartments for sale in the city bowl I noticed. The first is 41m^2 one bed apartment in Gardens on sale for R675 000. It has a net rental of R2 600 (R3 500 minus R900 in rates and levies) which means that the difference between the bond payment and the rent is more than twice the rental itself. Here's the yield and payment graph:

Paying in cash you get a pitiful 4.62% return on investment. To break even on cash flow requires a 70% downpayment and with a 50% downpayment the capital appreciation needs to be just over 3% to prevent you losing money.

The second property isn't much better. It's a 42m^2 one bed on sale at the Four Seasons (a specuvestor favourite) for a whopping R829 000 (that's about R20 000/m^2!) with a net rental of R3 300 (R4 000 minus R700 in levies). Here's it's yield and payment graph:

A 4.8% return on investment if you pay in cash, which is about half the inflation rate. Break even on cash flow with a 70% downpayment and 2.9% capital appreciation required to not lose any money even with a 50% downpayment.