01 Aug 2013
Buy-to-let in Sandton
Gauteng may not have the pristine beaches and coastal lifestyle but homes in Sandton, Johannesburg are in demand, particularly in the Central Business District where many people look to rent sectional title units.
Charles Vining, Seeff Sandton principal, says this demand has led to serious stock shortages as properties are let as soon as they come onto the market.
Vining explains that investors buy homes in Sandton central priced between R800 000 and R1.5 million.
“Buyers invest in Sandton because there is huge demand for property with massive commercial property developments creating demand for accommodation,” he says.
Asked what yields investors are getting, he says these are quite tight, between 6 and 7 percent because of levies with annualised capital growth of between 5 and 8 percent.
Western Cape buy-to-let
Laurie Wener, managing director of Pam Golding Properties (PGP) in the Cape Town metropolitan area notes evidence of price stability and conservative capital growth emerging and investors once again buying in the region.
Wener points out that investors predominantly buy property in established recession resistant areas such as the Atlantic Seaboard and City Bowl and in areas where there is a large student population close to colleges and universities in the Central City, Rondebosch, Rosebank, Claremont and Observatory.
Areas with large short-term letting potential such as the coastal areas of the Cape and the V&A Waterfront are popular for part-time use by owners and part-time letting.
“We have also seen some investors now interested in the ‘family home market’ (three or four bedrooms) in Newlands, Kenilworth and Claremont, for which there is high rental demand, driven primarily by the proximity to schools,” says Wener.
In the Boland and Overberg regions, PGP managing director Annien Borg says buy-to-let enquiries in areas such as Paarl, Stellenbosch and Somerset West where demand is always high due to good schools, university and good work opportunities has increased.
According to Borg, Hermanus/Onrus properties don’t get high long-term rentals because there are less permanent residents in these areas, but see great returns on short-term lets and owners still have the opportunity to use them as a holiday homes.
Louise Varga, area manager for PGP Stellenbosch and projects manager for PGP in the Boland & Overberg regions, notes that every year as more matriculants qualify to study at university, this increases the amount of students and the need for accommodation.
“In a town like Stellenbosch, property owners and landlords have always enjoyed the benefit and profit of short supply and high demand around the Stellenbosch campus.”
In short, it is always a good time to own an apartment on campus with the popular being two bedroom units.
Varga says very often, they have parents who buy units for their children and once the children finish their studies, they realise the potential of their investment and become landlords.
“We have recently also experienced parents buying a few years before their children come to university, they rent out until their children need the unit as this allows them to get a foot in the market as soon as possible.”
For example, Varga says in The Merriman, a two bedroom unit sold in 2008 for R1 540 000 achieved rental income of R6 000 per month, while in 2012, a two bedroom unit sold for R2 070 000 had rental income of R9 000 per month.
“This is a capital growth of 26 percent and a rental growth of 50 percent over five years.”
In Boschenpark, a two bedroom unit sold in 2008 for R995 000 achieved rental income of R5 000 per month while in 2012 a two bedroom unit sold for R1 270 000 saw capital growth of 22 percent and currently, units rent out for R7 500 with rental growth of 27 percent over 5 years, says Varga.
House prices and rental yields
As far as house price growth is concerned, Borg and Wener say there are signs of capital growth commencing as stocks fall and demand increases.
“Percentage is difficult to assess at present but the turnover figures are slowly beginning to approach those of 2007,” they say.
According to Wener, in City Bowl and Central City, properties priced up to R3 million are popular for investments.
Investors buying homes priced between R500 000 and R700 000 in Paarl and Somerset West/Strand, and a bit higher in Stellenbosch, look more at capital growth than rental returns, according to Borg.
Wener points out that lower priced properties generally yield higher rental returns and lower risk with regard to vacancies.
“Yields can range from 5 to 6.5 percent (gross), depending on purchase price negotiated and rental demand.”
Investors are urged to gather as much information as possible before buying, however, Wener notes that many investors are (more) mindful of the potential capital appreciation versus the rental return.
“Rentals range from approximately R6 000 to R20 000 per month and higher, depending on area and what the unit/property comprises.”
Borg says yields are between 7and 8 percent for areas like Paarl, Wellington, Franschhoek and Somerset West/Strand in the lower price brackets R500 000 and R700 000 and slightly less in the upper price brackets.
PGP notes that investors buy into the region because there is high demand for rental properties, security, renewed growth in property values and relatively easy re-sales, if the investment is in the appropriate area and price category.
Investors are from Gauteng and KwaZulu-Natal as well as locals in the region, notes the agency.
Overall, the agency says the outlook for the Western Cape buy-to-let market is good but there remains a high level of tenant demand across most rental categories, with expats and corporate executives also relocating to Cape Town, on contract or for longer periods. – Denise Mhlanga
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