If you’re a first-time buyer looking to get your foot on the ladder, or an investor looking for great long and short term rental potential, with low start-up costs, the attributes of Salt River with its up-and-coming, trendy community might be the right place to look.
“Many investors and first-time buyers overlook the tucked-away suburb of Salt River in favour of its neighbours in Woodstock or Observatory, but the opportunity in this oft-forgotten artistic hub is huge and now is definitely the time to buy,” says Nadia Wallett from Wallett & Finch Properties.
READ: South African property investment tips for beginners
As a real-estate enthusiast and hopeful first-time buyer, it's important to get a sense for the community you're hoping to invest in, suggests Wallet. As an example, the artistic buzz and friendly community feel of the Salt River area really comes alive during a the Baz-Art street-art walking tour.
Baz-Art, a French-sponsored organisation, has helped create 120 incredible and poignant murals in the area over the last 5 years, in an attempt to give a voice, and a canvas, to street artists from around the world. These colourful installations are a key aspect of the beauty and youthful soul of Salt River with Neighbourgoods Market at the Biscuit Mill, trendy new businesses such as Red & Yellow school of design, Devil's Peak Breweries, The Creamery and The Taproom further contributing to the ‘vibe’.
Would-be investors would also do well to get a good sense of the market, by digging into opportunities in the area. Comparing sold prices to surrounding neighbourhoods is a solid place to start.
The average list price according to Property24 Data for a 1-bedroom in Sea Point is R2.3m, while in Gardens a 1-bedroom is listed at an average of R1.89m. However, the average list price for a 1-bedroom is R1.3m in Salt River.
According to Wallet, an agent with over 15 years of experience selling in the area, Salt River's potential as an affordable spill-over hub is real.
“I think Salt River is a great place to invest because of the close proximity to town. It is on the border of the Woodstock design district. It’s close to Groote Schuur, the highway and the CBD,” she says.
“While there may have been a past stigma that the area is unsafe, it is in fact a family-centric community who takes care of it, and one another," adds Wallet.
“When looking at Salt River versus neighbouring areas like Observatory or Woodstock I would choose Salt River every time because you get all of the same benefits of location and culture but you pay a lot less per sqm for the properties, and you can get the same returns for long and short term lets - especially in sectional title units.
As a first time buyer, it is also important to understand the risks associated with South African or any other property, especially after Covid. You can also mitigate those risks by finding a property that would have he potential for both long, and short-term letting. While many may have once relied solely on Airbnb for income, experience during the pandemic has taught us better.
Wallet says, "I’ve had no issues filling my clients’ apartments even during the pandemic, the safety, proximity to town, larger square-footage, incredible views of the mountain and waterfront and the young urban feel of the area are all super attractive qualities and drive high demand and high returns.”
"Property prices were rapidly increasing, however, since COVID-19 hit prices have dipped again to a point where there’s an incredible opportunity to purchase properties in the area where rental income is capable of covering all bond repayments. We’re also seeing that Salt River is becoming a hub for young creatives and a great place for people to get their foot in the market," she adds.
New developments, increasing prices and a lot of young people moving into the area are all incredibly encouraging signs that Salt River is on the up and up, but what about the potential for short term rental? Wouldn't foreigners prefer more affluent classic locations like Sea Point, Camps Bay or urban city-centre apartments?
According to Dencel Rooks, founder and CEO of SWIFT Studios Self Catering Management, a short-term rental management service with headquarters in Salt River, with Covid "things took a major hit, the Airbnb market was completely dormant for 3-5 months and it’s been a super slow recovery."
“Before Covid our guests were 80% foreign, who loved the local charm and artistic vibrancy of the area, locals were a bit more in trepidation of the area but particularly American foreigners said it reminded them of areas like the Bronx - they loved it,” he says.
This comparison to the trendy artistic district of the Bronx, on the outskirts of NYC, makes sense - the street art, the markets, the close proximity to the inner city, the ‘open streets’, the authenticity and the general vibe of the neighbourhood.
"But there is light at the end of the tunnel, things started to really pick up again in Feb/March of 2021 and now, in September 2021 we’re seeing good movement on the platform again," says Rooks who has been managing units in the area since 2016.
Rooks, who charges a 15% management fee for his services, says up until March 2020 the SWIFT studios in Salt River was performing exceptionally well.
"The average nightly rate for single occupancy was R850, double occupancy was around R1050 and triple was R1400, and we were seeing occupancy rates of between 70%-100% during high season and 60% - 80% during low season. So investors were averaging R18,000/month during low season and R28,000-R30,000 during high season. Originally paying R1.4-R1.9million for the units they were obviously incredibly happy with the return on investment. Even if they had taken out a 100% bond they were still making huge profits.
"We’ve already got a bunch of European guests booked for the summer season. Unfortunately American’s aren’t really coming in yet, and they used to form about 40% of our market, so it’s not all hunky-dory, but there is hope, there’s a lot of positive movement again, and I’m confident that we will soon be back to where we were if things keep moving in this direction."
And while potential for long and short-term rentals are on the up, there also appears to be a number of great units coming onto the market in some of the most popular blocks - due to the unfortunate impacts of Covid on so many.
But what are the downsides or pitfalls to watch out for when investing in an area like Salt River?
“When thinking about investing in Salt River I would advise people to stick within the pockets of new developments which have controlled security access and underground parking. Stick to sectional title and avoid free-hold; the security aspect of sectional title creates increased value and stability. I would also advise people to be very aware of the wind; and the clear benefits of North vs. South facing units; North facing units are far more protected from the strong south-easterly summer winds and they also get more sun throughout the day. However south-facing units often come with magnificent views of Table mountain lending themselves to excellent and expedited resale. You would always want to have secure parking as break-ins on the roads around Salt River are quite common,” says Wallet
"So, summing it all up - with interest rates at all-time lows, and an influx of units hitting the market post-covid it’s an awesome time to invest in the Salt River and take advantage of this market dip.
If investors want to take the safe route long-term rental rates on these units can go from between R8,2000 - R12,5000 per month and "on Airbnb occupancy rates for the next few months are sitting at around 40% for October, November’s pretty dead in the pre-Christmas hibernation, Decembers at around 60% and January’s also at 40%”, says Rooks.
"These rates are increasing daily and my phone hasn’t stopped ringing with new enquiries! If you consider average nightly rates you could expect to gross around R15k/month for the summer season - which is nowhere near where things were, but it’s still good, all things considered," he adds.
"While the area may not yet be fully recovered when it comes to Airbnb, hopes are high and long-term rentals are still stable. Salt River may just be Cape Town’s best-kept secret."
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