13 July 2021
A connected global village and the call of Africa...
COVID-related lockdowns have created a global village that is more connected digitally than ever before. While South Africa has always been an alluring short-visit travel destination, it now also appeals as an extended-stay destination to those who can remain for longer because they can work remotely. Property investors can tap into the potential offered by both short- and long-stay accommodation demands from the international community.
Look for property features that align with a discerning resident/ tenant:
Secondly, technology is delivering property-investment opportunities through property platforms that facilitate investment in real estate anywhere in the world, for prices sometimes as low as $1 000. An example of this is Wealth Migrate.
Re-imagining existing spaces...
Hotels and entertainment venues, office buildings and retail properties have been severely impacted by COVID. Recovery will happen, but it will take time. Embattled property owners will need to get creative in the meantime. Affordable housing and industrial real estate (e.g. cold storage, warehouses and distribution centres, and data centres) are two sectors in high demand. Look for opportunities to turn a hotel in the heart of the city into an affordable housing project or at converting a retail building into a distribution centre or warehouse.
Favourable market conditions…
Interest rates are at a 50-year record low, which favours investment returns; further market indicators tell a positive story. Our industry partners, BetterBond, are reporting year-on-year increases in first-time buyer income, approved loan amounts and purchase prices, and our partners Lightstone report that the current annual property inflation rate is 4.56%.
The Finance Linked Individual Subsidy Programme (FLISP) provides an opportunity for first-time buyers in the 'affordable or gap' market, i.e. those who earn between R3 501 and R22 000 per month, to take advantage of these market conditions.
“Individuals in these salary bands generally find it hard to qualify for housing finance; their income is regarded as low for a home loan (mortgage or pension/provident backed loan), but too high to qualify for the government 'free-house' subsidy scheme”.¹
It’s the first step in building a property portfolio.
Featured developments that meet these criteria: Pioneer Valley
What local demands can property investors tap into?
Ongoing demand for student accommodation and "Zoom Towns"...
According to Statistics South Africa’s 2020 Mid-year population estimates², about 28,6% of the population is aged younger than 15 years. That’s almost
¹/³ of our population (more than 17 million people) who still need to finish school and, for those who are able, to complete their tertiary education. The demand for student housing is already staggering and estimates place the current shortfall at more than 500 000 beds; this is predicted to grow to 781 000 beds by 2025.
If you live near a university or other tertiary institution/s, look at opportunities to meet this need.
Featured developments that meet these criteria: The Edge
The “semigration” trend offers another opportunity. Many South Africans have moved temporarily/ permanently from cities like Johannesburg in order to remote-work from smaller towns. Coastal towns especially are seeing good growth rates in property prices and the shortage of cheaper rental properties in many of them offers interesting investment possibilities.
A rental market under pressure...
In its Vacancy Report 2021 Q2, TPN reports that “Nationally, vacancy rates have stabilised at 13.15%, a demand rating at 53.01 confirms that tenants are still in the market but in reduced numbers, and a supply rating of 68.76 means that landlords are competing for this limited tenant attention”.³
Payprop, in its Q1 2021 Rental Index, reports that “since January 2020, the repo rate has been lowered by 3 percentage points to its lowest level in decades, prompting many tenants to buy their first homes. This exodus of more creditworthy tenants from the rental market, coupled with the ongoing financial constraints experienced by others, continued to put downward pressure on rental prices into the first quarter of 2021”.
Further, TPN reports that fewer than 75% of tenants are in good standing. Some landlords are under pressure to maintain their properties, as well as pay taxes, insurance, and their mortgage. Keep an eye on rental listings that stay on the market - you may find someone willing to offload their property.
Rethinking suburban life…
Lockdown taught us that many of us can work from home, and workplaces need to offer softer factors, such as wellbeing, culture and leisure to compete with the work-from-home lifestyle. Mixed-use developments offer the modern worker all that, and will become increasingly sought after and valuable, especially in sprawling cities like Johannesburg and Cape Town where commuting can be time-consuming and difficult. Those that are also close to transport nodes are likely to offer exceptional return on investment.
There has not been a better opportunity in many years to enter the investment-property market or to increase one’s holdings. Do your own research and speak to highly regarded agents in the areas where you decide to focus. This is the best way to assess local value and demand.
For more information on Just Property please visit www.just.property or call (087) 550 2258.
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