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24% returns on Atlantic Seaboard homes

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18 Jul 2013

According to May sales report, City Bowl in Cape Town saw increased buyer activity and this wave of interest is not guaranteed to last forever, warns Francois Venter, director of Jawitz Properties.

A guesthouse in Molteno Road, Oranjezicht, bordering Higgovale in Cape Town’s City Bowl, is on the market for R15 million through Jawitz Properties - click here to view.

Venter urges those wanting to get into the market to buy now and says sellers should make the most of the buyer demand currently being experienced.

“Investors are buying older properties to renovate, or buying to let, where they can secure a good 8 percent return on their investment, and many parents are looking to buy properties for their children who are students, studying in and around the city,” he says.

Despite the plummet of prices in recent years, the City Bowl has remained resilient and freehold properties that have been for sale for some time, are selling for close to their asking price – demonstrating demand and that stock is being snapped up, explains Venter.

“If stock is realistically priced, it moves very quickly, and we are noticing that there are a lot of cash buyers around, such as young families in their 30s.”

He says these buyers look for homes priced between a price range of R6 and R10 million, so affordability is most certainly there, what’s more, banks have been relaxing their lending criteria and interest rates are at an all-time low, favouring buyers needing to secure home loan finance.

Venter points out that from 1 January to 31 May, sectional title sales indicate that the city centre is the most popular location, offering the closest proximity to all the CBD offers, as well as easy access out of the city. Vredehoek, Oranjezicht and Tamboerskloof are also popular sectional title suburbs.

Meanwhile, for freehold property sales, Oranjezicht, which demands the highest prices, and Tamboerskloof are most popular with buyers, followed by wind-free Higgovale, as well as Gardens, and Vredehoek.

“Freehold property in Devils Peak, however, on average sells the fastest, with homes for sale listed for just 21 days and Vredehoek sectional title properties come in at second place, with an average of just 22 listed days.”

In the same period, the average selling price of a freehold property was R6.5 million in Oranjezicht, R5.7 million in Higgovale, R5 million in Tamboerskloof, R3.9 million in Devils Peak and R3.1 million in Gardens and Vredehoek.

For the same period, the average selling price for sectional title units came in at R3 million in Higgovale, R2.1 million in Tamboerskloof, R1.4 million in Vredehoek and Gardens, and R1.2 million in the City Centre and Oranjezicht.

“Buyers are prepared to take their time waiting for value, but they will move on to other suburbs if they can’t find a property for sale that meets their requirements.”

Steven Delit of RE/MAX Living Atlantic reports that on the Atlantic Seaboard in May, buyers were purchasing large apartments compared to the previous year and sale prices continue to increase.

According to Venter, City Bowl is a blue chip area with more buyers wanting to settle down in the area should they find the right property at the right price.

Steven Delit of RE/MAX Living Atlantic reports that on the Atlantic Seaboard in May, buyers were purchasing large apartments compared to the previous year and sale prices continue to increase.

He says the average size of an apartment bought this year is 129 square metres compared to 112 square metres for the comparable period last year, or an increase of 15 percent.

As a result of this, the average price increased by 27 percent this year compared to the price per square metre increasing by 9 percent.

“The increase in the number of apartments sold this year combined has resulted in a shift in the market place with many one bedroom apartments available while there is a shortage of three bedroom apartments,” he says.

On houses sold in May, he says the number was down from the same period in 2012, but with more expensive houses being sold.

Delit says the average price of a house bought in May was R13.1 million compared to R7 million in May 2012, and year to date, the average has now increased to R9 million compared to last year's R8.5 million.

Sellers of prime Atlantic Seaboard property in the suburbs of Fresnaye, Bantry Bay and Clifton have seen stellar investment returns of  between 21 and 24 percent on freehold homes and 16 to 20 percent on sectional title properties sold over the past 18 months in the price band of R10 million.

According to Ian Slot, managing director of Seeff Properties for the areas, this information is based on property sales concluded between January 2012 and June 2013 and an average holding period upwards of 5 to 6 years.

The study shows that 36 freehold and sectional title properties with an annual average holding period of just over 6 years that sold during the period, yielded a gross profit of almost R400 million for the sellers.

“While there are obviously exceptions and reasons of urgency may result in minimal capital growth outcomes or where improvements or renovations would boost the capital growth value, the study shows that on the whole, sellers are still seeing significant investment returns on resale.”

Sellers of prime property priced above R10 million in suburbs such as Clifton in Cape Town have seen stellar investment returns of between 20 and 21 percent over an average 5 to 6 year holding period, according to Seeff Properties.

Slot says while still nowhere near the pre-2007/8 levels, they are seeing a noteworthy improvement in investor sentiment at the top end of the market and the capital growth yields achieved over the past year illustrate that this is not misplaced.

Around 127 properties to the value of just over R3.5 billion sold in these suburbs for the period under review.

Freehold property sales in the R10 to R20 million price bracket showed an average investment return of 21 percent per annum while those above the R20 million mark yielded 24 percent.

Fresnaye came out tops at an average yield of 23 percent (R10 to R20 million) and 32 percent above this price band, while Bantry Bay sales yielded 21 percent and 24 percent and Clifton 20 percent and 21 percent respectively in the two price bands.

As an example of stellar returns over the last year, Slot says a home in Fresnaye (Ave Des Hugenots) that was bought in early 2005 for R3.3 million sold earlier this year for R21 million, yielding an average annual capital growth of 26 percent and a profit of R17.7 million for the seller.

Another, a Clifton villa (Ocean View Drive) was bought in 2005 for R5.4 million, recently resold for R19 million, yielding a growth rate of 21 percent and a profit of R13.6 million.

For sectional title property sales, Clifton sales showed an average yield of 20 percent over a 6 year period while Bantry Bay sales yielded 16 percent on average.

For example, a 144 square metre apartment in Clifton (Heronwater located on the seaside of Victoria Road) was bought in early 2009 for R7.5 million and resold earlier this year for R13.5 million, yielding a 17 percent return in under 4 years.

The study illustrates that those that have bought smart and held onto their property for five years and longer have yielded significant investment returns despite the down-market conditions, says Slot.

“If you want value retention, then the Atlantic Seaboard and City Bowl offer some of the best areas in which to invest,” he adds. – Denise Mhlanga

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