Rethinking Property Returns: Look beyond the sale price
By Ronald Ennik, Principal, Ennik Estates
Many property owners make the same mistake when evaluating their returns on a home they’ve sold: they look only at the difference between the purchase and sale price. On the surface, it seems simple enough — if you bought a property for R2 million three years ago and sold it for R2.2 million today, you might conclude that you made a modest R200 000 profit. But that’s a very narrow way to measure the performance of your investment.
Here’s the real story. If you put down a deposit of R200 000 and financed the remaining R1.8 million through a bond, your actual investment — the money you put in — was that R200 000. When you sell the property for R2.2 million, you’ve gained R400 000 on your original capital. That’s effectively a 200% return over three years on the cash you initially committed.
This is the essence of property leverage — using borrowed money to amplify your returns. It’s what makes property such a powerful long-term wealth-building asset. The important thing is not just the headline sale figure, but how the capital you personally invested has performed.
It’s also why buyers should think carefully about the balance between their deposit and borrowing — and the type of property they’re investing in. Well-chosen properties in growth areas tend to deliver not only stronger capital appreciation but also the potential for rental income.
Too often, property owners get disheartened when they sell and see a seemingly small difference between their purchase and sale prices. But when viewed correctly — in relation to the money you actually put in — property can deliver significant, compounded growth over time.
It’s not about what your property sold for. It’s about what your money achieved.
ENDS.