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SA homes a safe haven for investors

30 May 2013

Amid growing market confidence, interest rates remain stable and unchanged, with prime lending rate at 8.5 percent, it seems there is security in bricks and mortar.

This four bedroom Chatsworth property includes two houses - a spacious main house ideal for entertaining and second house with a cottage - and it is selling for R2.2 million through Seeff Queensburgh/Chatsworth.

Looking back at house price growth cycles, history shows that the South African residential market has the propensity for significant capital growth, says Seeff chairman, Samuel Seeff.

It is for this reason that he believes by buying smartly now, buyers could reap significant rewards once the market turns.

“The secret is to buy below your means and allow room in your budget for future interest rate and basic utility cost hikes.”

Seeff points out that indications are that buyer confidence is up, predominantly in the major metropolitan areas where the gap between supply and demand is beginning to narrow with growing stock shortages being reported.

In some instances, buyers can still get good deals and mortgages are more affordable than they have been in decades.

According to Bill Rawson, chairman of the Rawson Property Group, there is a steady growth of buy-to-let investors and a renewed interest in property as an asset class in the South African residential property sector.

While many investors who have put money in other assets may not be getting good returns, those who invested in property have done well as residential property has performed well in the last 10 to 15 years.

As an example, investors who bought units in Parklands for R250 000 have seen a huge appreciation to R750 000 in 12 years.

Rentals have also risen by between 7 and 8 percent per annum with excellent returns being achieved on brand new units from the day of handover. What is more, the rent increases seem likely to continue, he explains.

However, he points out that while it is almost certain that an increase in property values is now a thing of the past, it is fair to say that price stabilisation right across the board is now the trend.

“If investors are concerned about South Africa’s position and are looking for a safe haven, residential property is quite clearly the place to be.”

Asked to what extent an investor should commit to property, Rawson notes that Knight Frank indicates that High Net Worth individuals globally have 25 to 30 percent of their assets in property.

“This is widely accepted as a good level – although others are content to invest as much as 80 or 90 percent of their wealth in property,” he says.

While many investors who have put money in other assets may not be getting good returns, those who invested in property have done well as residential property has performed well in the last 10 to 15 years.

In the Western Cape, investors are increasingly buying into the Atlantic Seaboard suburbs of Sea Point and Green Point.

Thanks to major facelifts, Sea Point is returning to its former glory while Green Point is thriving with its own developments including the new Green Point Urban Park, says Francois Venter, director at Jawitz Properties.

Buyers are mostly interested in sectional title homes priced below R2.5 million.

Venter says in Green Point, two bedroom units are selling for between R1 and R2 million with first-time buyers choosing this location for a starter home.

According to Propstats, comparative figures in the under R2.5 million sectional title market for the first third of the year (1 January to 30 April) and the same period last year, indicate that both Sea Point and Green Point enjoy buyer activity. 

Properties for sale in these areas are on the market for a much shorter period of time this year.

“The average number of days that a Sea Point unit is on the market has reduced from 108 days in the first third of last year, to just 75 days this year, and in Green Point, this figure has decreased from 106 days to 86 days,” says Venter.

Both suburbs have seen the average price of a unit increase by over R100 000 this year.

In KwaZulu-Natal, Seeff Queensburgh’s licensee Jan Vermeulen says Chatsworth consisting of various suburbs is seeing buyer demand thanks to its friendly atmosphere, being vibrant and business orientated, with a mostly Indian community.

For example, he says in Havenside and Montford properties cost around R650 000, R700 000 in Bayview and Westcliffe, R1.1 million in Silverglen, R850 000 in Woodhurst, R1 million in Kharwastan, R1.4 million in Umhlatuzana, R600 000 in Croftdene, R750 000 in Arena Park, R550 000 in Moorton and Crossmore, and R900 000 in Shallcross.

Flats are priced from R450 000 with the lower price range attracting first-time home buyers, newlyweds and singles, as well as retirees who are downsizing.

Those who buy at the top end tend to be professionals, says Vermeulen.

Tyson Properties reports that property buyers are uncovering Durban’s best kept secret  – the leafy suburb of Westville.

39A Kings Avenue is a four bedroom home in Westville and is selling for R4 450 million through Tyson Properties Westville.

According to Lee Ellis, inland director of Tyson Properties, Westville ticks all the five boxes that would-be buyers should seriously consider when investing in properties for the long term.

It is well-located and its environs are close enough to Durban to be convenient and far enough away to allow residents to enjoy the more country like feel of the Upper Highway area.

For commuters, Westville is particularly accessible as it is positioned within a network of highways such as the M13, M19 and N3, making the city centre as well as major nodes to both the north and south easily accessible.

Westville is just 15 minutes from the Durban CBD and about 30 minutes from King Shaka International Airport.

Ellis says Westville is home to some of Durban’s best government schools and it is close to the University of KwaZulu-Natal’s Westville campus.

It also has good medical facilities in both Westville and Pinetown, with shopping facilities at the Pavilion, Westville Shopping Mall, Village Mall and Westwood Shopping Centre.

“Westville offers buyers an unrivalled quality of life and this is measured by how long people stay,” Ellis points out.

He says in Cowies Hill, people buy to stay – nearly 50 percent of sellers over the past year owned their properties for more than 10 years.

Approximately 70 percent of the recent buyers were under the age of 50, 60 percent of the existing owners in the suburb are over 50 years old.

“The total value of residential sales in the suburb in 2012 was similar to the total value of residential sales in 2006 before the economic downturn,” says Ellis.

According to Ellis, Westville brings with it the value attached to an established and sought-after area.

As an example, he says in Dawncliffe, just over 50 percent of existing owners and recent sellers had owned their homes in excess of 10 years.

“It should be noted that over 80 percent of recent buyers were under the age of 50 years old.”

An interesting fact is that the average age of existing owners in Dawncliffe has reduced substantially of late as the homes in this suburb are more affordable and younger buyers with families are seeking good value for their hard earned money, says Ellis.

The average price for a residential home in Dawncliffe is in the region of R1.5 million and the total value of homes sold in Dawncliffe in both 2011 and 2012 was higher than the period during the property boom between 2004 and 2006, he adds. – Denise Mhlanga

About the Author
Denise Mhlanga

Denise Mhlanga

Property journalist at property24.com

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