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Capital Growth vs Yield – which is more important?

Both capital growth and yield are important considerations in any property investment. These two variables tend to move in opposite directions to one another:

  • A property with high capital growth expectations typically has a lower yield (eg. an apartment in Camps Bay); whereas
  • A property with a higher yield typically has lower capital growth expectations (eg. an apartment in the Johannesburg CBD).

Investors should evaluate property investments based on their investment preferences and risk profile:

  • Investors seeking higher disposable income may have a preference for higher yielding property investments with higher rental income
  • Investors with a longer term view may be prepared to accept lower yields in exchange for greater capital growth in the longer term
  • It is important to note that Capital Gain is never guaranteed and the prices of properties in any area can experience low growth or even negative growth over certain periods.

Check out this video for a brief explainer on how they work together as a combined measure in the return of your investment:

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