Just Property Invest’s Minette du Plessis says that both have advantages, but property still has the best return. Property has the accumulative growth of the investment which is the combination of the capital and rental growth.

Look at the following scenario of having to save 17% of your monthly income towards an RA. When your investment matures, you can only withdraw 33% of the total, the rest to be invested in a pension vehicle. Will you be able to live off the residue?

The alternative, looking at the following scenario, is to buy a property of R 1 000 000 and rent it out. If you put the rental income plus the money that you would have put into an annuity into the bond, you could break even on that property in 4 to 5 years. You will then be able to buy another property and build an investment property portfolio.

Pro’s for an RA

You don’t have to pay capital gains tax on the fund growth

You are able to invest to 27.5% of your pre tax money into these funds.

If you pass away, an RA does not become subject to the normal estate regulations but will be transferred to the beneficiary of the deceased immediately as identified in the will.

Con’s for an RA

You run the risk of outliving your investment

In the event of a market crash, you carry the full investment risk

No access to funds in an emergency

Fees and commissions paid to brokers

Pro’s for a property investment

It’s self-funding. It is possible to fund your investment mainly with someone else cash (rental). You will be financing a large portion of your retirement using rental capital.

It’s a nest egg. Properties appreciate and while most retirement annuities have limits to how much capital you can withdraw as cash on retirement, properties can be sold at any time to liquidate their full value.

It has tax benefits: One selling point for retirement annuities re the tax benefits, but property investments have tax benefits too. The interest paid on a bond are tax deductible, which can be quite significant early on while you still working and earning.

It leaves a legacy. By living off income generated by a property portfolio without selling the property, you can build a valuable legacy. A good property portfolio can provide financial stability for your heirs.

The ability to generate a rental income that keeps pace with inflation

Con’s for a property investment

Costs incurred when buying a property. Transfer duties, bond registration costs and conveyancing costs

Costs when selling a property. Estate agents commission and capital gains tax.

Monthly costs of ownership. Bond repayments, rates and taxes, insurance and levies.


Malta’s property as an investment/retirement option

Bond rate in Malta of 3.2%

Pay 15% tax on rental income

No rates and taxes

Property prices increase annually by 4 to 10% depending on kind of property

Rental is showing similar growth

Earning in Euros, a hedge against the weakening Rand

Initial investment takes money out of the South African market