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Umhlanga ticks all the boxes for property investors

19 Jul 2019

Property News

Brought to you by Property24

The general advice when buying residential property is to buy based on ‘location, location, location’.

This two bedroom, two bathroom apartment in Umhlanga Rocks, KwaZulu-Natal, offers an open-plan gourmet kitchen, bar and sea views. It is on the market for R9.95 million - click here to view.

Gareth Bailey, Pam Golding Properties area principal for Durban Coastal based in Umhlanga, says while this is good advice, when considering buying a property in coastal towns such as Umhlanga just north of Durban in KwaZulu-Natal, how does price growth of frontline properties compare with properties located a few roads back from the beach?

Does the mantra apply absolutely in this scenario, or do properties a few roads back hold their own?

“From a property investment point of view, conventional wisdom suggests that we should always choose frontline properties over those located away from the beach because they offer the best sea views, easier access to the beach and the best capital gain prospects due to limited supply,” says Bailey.

This 203sqm beachfront apartment in Umhlanga Rocks, KwaZulu-Natal, has three bedrooms and two bathrooms. It is selling for R6.95 million - click here to view.

However, he says these benefits come at a premium that is unaffordable to many people. Properties set back from the beach are cheaper and can offer different lifestyle aspects, for example, the opportunity to live in a simplex or duplex and have your own garden.

But how do these properties perform from a capital growth point of view?

In considering this question, Bailey pulled a Deeds Office transfer report for the last nine years and compared three popular frontline sectional title schemes - Edge of the Sea, The Oysters and Seashore - with 10 schemes set back from the beach, including The Shades, Terra Mare, Umhlanga Terraces, Seaford Park, Costa do Sol, Palma Nova, to name a few.

He found that the average selling price of frontline units in 2009/2010 was R5.6 million, which nine years later has increased to R7.4 million. Likewise, the average selling price for sectional title units set back from the beach was R1.5 million in 2009/2010 and is now R2.5 million. To reduce the bias caused by unit size, Bailey considered growth in terms of average price per square metre.

This three bedroom, two bathroom townhouse in Umhlanga Rocks, KwaZulu-Natal, offers three bedrooms, two bathrooms and is close to the beach. It on the market for R3.395 million - click here to view.

“Frontline properties averaged R26 400 per square metre in 2009/2010 and R38 300 in 2018/2019. Properties set back from the beach averaged R14 000 and R21 400 per square metre over the same period respectively. This means that in growth terms, frontline properties experienced 45% growth over the term, averaging 5% per annum, while their non-frontline counterparts experienced 54% over the term and 6% per annum,” says Bailey.

“This is interesting as it suggests that while frontline property commands a premium in price, the actual growth rates are very similar, in fact, based on this dataset, growth in properties set back from the beach has outperformed frontline properties by 20% over the nine-year period.”

So the case for ‘location, location, location’ applies more broadly in this case and does not rule absolutely in terms of price growth, despite the frontline’s better position, he says.

This two bedroom apartment in Umhlanga Rocks, KwaZulu-Natal, has a large balcony with views and is close to amenities. It is selling for R1.45 million - click here to view.

“This offers just cause for investing in Umhlanga properties set back from the beach as they are more affordable and offer sound capital growth over time. Many of these properties have small gardens, offer easy access to the promenade and the beach, and allow pets. They can be rented out on a long term basis (six months or more) or they can be holiday let to generate rental income.”

Bailey adds that not all schemes permit holiday letting in terms of their body corporate rules, but some do, and this offers investors flexibility to earn income from the property during the year but also to enjoy it themselves from time to time when they are in town. In addition, given the dual investment and lifestyle characteristics of these properties, they present a compelling case for investing now and retiring here later.

“That’s not to detract from the compelling appeal of frontline properties - for those who seek the ultimate location a stone’s throw from the ocean with totally unobstructed 180-degree views, the premium price tag becomes secondary to the prime location,” says Bailey.

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