Huge demand for homes in mining towns

17 Aug 2011

Mining towns and villages are experiencing a surge in property demand thanks to the rising platinum prices and expansion of mining operations.

These sectional title units comprising two bedrooms, two bathrooms are priced at R669 000 through Pam Golding Properties Lephalale. The units are sold with rental contracts in place for R6 500 per month.

Estate agents operating in mining areas are reporting a never-seen before demand for properties to buy and to let.

In the North West mining village of Mooinooi and surrounds, the mining of platinum has renewed investor appetite in buying property.

According to Amelda Scheepers, principal of RealNet franchise in Mooinooi, this village located in the middle platinum belt between Brits and Rustenburg was hit hard in 2009 when the global recession saw the platinum price plunge from around $2000 an ounce to $800 an ounce almost overnight.

“Jobs and livelihoods were wiped out in days and no-one was interested in buying a home here, even at rock bottom prices,” says Scheepers.

 She says with the platinum price back up to almost $1800, two new mines have opened in the area and the demand for property is climbing steeply.

 “There is high demand for rental homes with virtually nothing available in the R5000 to R7000 per month range at the moment.”

 Scheepers says three bedroom homes in the area sell from R600 000 and investors are starting to see opportunities to make good returns.

“At these prices, many young families associated with the mines are opting to buy rather than to rent,” she says.

Mooinooi now has its own pre-school and Brits, which is just 11km away, has primary schools and a high school plus a shopping centre. 

Smallholdings of between 5ha and 20ha are priced at between R1.2 million and R4.5million.

“Many of these have rental flats and cottages that are suitable for single people working on the mines or for young couples, so the owners can earn a good income or additional income from their plots.”

Given that 80 percent of the world’s reserves and production of platinum occur in South Africa, the metal is an important part of the country’s economy, says Marc Ground, commodity strategist at Standard Bank.

Ground explains that platinum is the rarest and heaviest of the precious metals. In the case of Mooinooi, the viability of expanding operations would be linked to the platinum price, for example, higher prices could spur greater expansion given the extent of the reserves.

He says while he is not an expert on property nor Mooinooi, it stands to reason that growing mining operations would require more labour which in turn would require more housing units.

“The associated infrastructure development might also enhance property values,” says Ground.

Ian Straarup, Pam Golding Properties (PGP) area principal in Rustenburg, says the platinum price has consistently climbed and a sense of optimism has returned to the market since the beginning of 2011.

“There is more activity in the market than in the past and serious sellers are adjusting their prices accordingly.”

He says traditionally, buyers have relied on or expected 100 percent bonds in order to buy property. While property sales are still concluded, banks remain reluctant to give 100 percent loans.

Stilfontein in Klerksdorp is seeing demand for homes mainly in the price range of up to R450 000 for a three bedroom house.

Sandra Foley, PGP area principal says this area is known for its affordable housing and attracts home buyers relocating from other mining towns.

“Buyers are generally first-time buyers and pensioners relocating from other mining towns due to the fact that affordable homes can be purchased in Stilfontein.”

Thanks to the new Eskom’s Medupi power station project and demand for houses, the Lephalale property market has shown above average growth in property prices for the last five years, says Assis Pontes, PGP area principal.

"Demand has been driven by coal reserves and further mining investments currently in place and this is expected to fuel growth of the Lephalale property market,” says Pontes.

However, Pontes says affordability for many buyers remain a challenge. Buyers and investors are interested in sectional title properties. These are priced at R669 000 for a two bedroom house and rentals are in the range of R6 500 per month for these units. 

Anton Greeff, manager of PGP in Lydenburg/Mashishing says sales in the area over the past seven years have recovered reflecting a growth in average property prices of over 40 percent.

“Mine workers in Burgersfort area prefer to live in Lydenburg/Mashishing due to better infrastructure,” says Greeff.

This Waterberg property is 50ha in size offering panoramic views. It is ideal for weekend retreat and is priced at R1 650 000.

According to Lightstone reports, buyers aged between 20 and 49 are moving into the area. The reports further reveal that since 2004, the average price of property has climbed constantly every year (with a slight lump in 2007/2008).

 “The average freehold property price in Lydenburg stands at R990 000 and this has risen since 2004 from R300 000.”

He says property is still a good investment and typical buyers include 50 percent aged between 36 and 49 years and 28 percent of buyers are under 35.

There are two new secure developments, The Heads and Sterkspruit which first-time buyers seem to like. Property stock below R1 million is in demand and scarce too. In secure estates, buyers can pay up to R1.2 million and R1.5 million.

The rental market is hugely under-supplied and over-priced. A three bedroom house fetches a monthly rental of between R8000 and R12 000 and mine workers can pay up to R19 000 for larger properties. There is shortage of rental properties in the R4000 and R7000 price category.

“Guest houses are fully let during the week, mostly occupied by professionals from Gauteng and Rustenburg,” says Greeff.

Closer to Johannesburg in Krugersdorp buyers can pick from a range of properties from R500 000 for a three bedroom house in Krugersdorp West to R4 million six bedroom house in Noordkruin.

PGP Krugersdorp manager, Hannes Jansen van Vuuren says buyers seem to prefer full title homes in secure estates in Noordheuwel and Chancliff areas.

He says entry property price levels are between R1 7 million for a three bedroom house and up to R2 2 million for a four bedroom double storey.

“Some 45 percent of buyers are aged between 39 to 49 and 35 percent are between the ages of 20 and 35,” he says.

He cites reasons for buying in these locations as offering good value for money when compared to Sandton. An average buyer in this market puts down a 5 percent deposit which helps with the home loan application. – Denise Mhlanga

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