Location, Location, Location: A Guide for New Investors and First-Time Home Buyers
That old adage "Location, Location, Location" holds true. Understanding why location matters and what makes one node a better location than another is crucial for making informed decisions. Paul Stevens, CEO of Just Property, shares a guide aimed at new investors and first-time home buyers.
For most of us, a property purchase is the biggest investment we’ll ever make. Across all investment vehicles, the best value is certainly related to timing, but when buying a home or investing in property, ‘where’ you buy is just as important as ‘when’ you buy.
A trusted property professional is the best person to help you find the ideal investment, but because estate agents specialise in certain areas, one often chooses the area before one chooses the agent. So, we’ve put together this guide, which I hope will help first-time buyers and new investors confidently navigate the property landscape.
Why Location Matters
Value Appreciation
One of the primary reasons location is so critical in real estate is its direct impact on property value. Properties in sought-after locations are more likely to grow in value with time, providing better returns on your investment. Suburbs with good infrastructure, respected schools and bustling local economies are always in demand - and more buyers means higher prices. Choosing a property in an area where there is high demand can significantly enhance the potential for capital growth. Another old property adage to keep in mind is: “Choose the worst house in the best area you can afford” - following this advice will set you on the road to success. Remember, you can renovate your home whenever you have extra funds, eventually turning that “worst house” into a dream home, but you can’t change the location. So, focus on getting a foot in an area where many would love to live.
Lifestyle and Convenience
For home buyers, location influences lifestyle and convenience. It’s important for all of us to live close to essential services like schools, healthcare facilities, shopping centres, and recreational options. Safe neighbourhoods with access to parks and open spaces (often described as “leafy”) and public transport are very appealing to families as well as professionals. When looking at a property, always evaluate how the location aligns with lifestyle needs and daily routines. Visit at different times of the day to see what the traffic situation is like, speak to people living in the area, ask the local Police about the crime stats… In other words, do your research!
Rental Yield
I always say that property is the best way to generate generational wealth, and that’s because once you have one investment property, you can leverage that to buy your next investment. Rental income from two small properties could be a retirement fund for your old age and a legacy to leave to your children. However, as with buying a home for yourself, location also plays a pivotal role in determining rental yield from investment properties. A property that is on the doorstep of a good school, a university, a business district AND a transportation hub will attract a wide variety of tenants and is, therefore, likely to deliver consistently good rental returns. Get to know the rental market dynamics in the different locations you’re considering so that you can make strategic decisions that will maximise the rental income your property can achieve. Then, make “live, work, play” your mantra when assessing opportunities.
What Makes a Good Location in South Africa?
Infrastructure and Development
In South Africa, areas with well-developed infrastructure and ongoing development projects are highly sought after. You want to look for good access, so consider road networks in and out of the area, reliable public transport, and, obviously, reliable utilities like water and electricity, which are essential factors. Sadly, infrastructure in much of South Africa is ageing and decrepit. You don’t want failures to add to the already significant woes of load shedding, potholes and water shortages. Look ahead and zero in on areas where there is future growth potential. Research what, if any, infrastructure upgrades are planned - like new highways (and - conversely - bypasses), public transport projects, substation maintenance and new commercial developments – such projects can signal future growth and increased property values. Keep an eye on government and local municipality plans as well as private sector developments that could enhance the attractiveness of a location. Emerging neighbourhoods on the outskirts of major cities often offer more affordable entry points with the potential for significant appreciation as development progresses.
Safety and Security
Safety is a top priority for all of us—home buyers, tenants, and investors. Suburbs with a low crime rate and visible security initiatives will attract more buyers and tenants, raising demand and the value of your property. Gated communities, security estates, and areas with active community policing forums are particularly popular. So, as mentioned previously, it's important to research crime statistics and speak to locals when evaluating an area in terms of its safety.
Proximity to Employment Hubs
Locations near major employment hubs, such as business districts and industrial areas, are highly desirable. Traffic is a nightmare in many major cities in our beautiful country. So, short commutes to work can significantly enhance the appeal of a property. Metros like Johannesburg, Pretoria, Cape Town and Durban have key employment nodes that drive demand for nearby residential properties. So look for the CIDs (City Improvement Districts), where businesses contribute funds towards the upkeep, cleansing and security of smaller business nodes. For investors, properties in these areas can offer strong rental demand and higher occupancy rates.
Educational Institutions
Access to quality educational institutions is a critical factor for families. Zone in on suburbs that contain excellent schools, colleges and universities – these always attract long-term residents, driving up property values. There are reports that popular schools in Cape Town’s southern suburbs of Cape Town and Joburg’s northern suburbs receive applications ten times higher than the number of places they have for Grade R and Grade 8. As a result, properties close to such schools are particularly popular among home buyers with children.
Amenities and Lifestyle
But life is not only about work. And a good location will offer a range of facilities that enhance the lifestyle of its residents, young and old alike. So look at how close the property you’re considering is to shopping centres, restaurants, parks, sports clubs and other recreational facilities. And don’t forget that there are areas away from major metros that have increased in attractiveness now that remote working and online schooling are real possibilities. Coastal areas and those with natural beauty, such as the Garden Route or the Cape Winelands, offer unique lifestyle benefits that can increase demand and value.
For new investors and first-time home buyers, understanding the role that location plays in the South African property market is essential. Your checklist must include the factors outlined above: infrastructure, safety, proximity to employment hubs, educational institutions, amenities and future development plans.
Once you’ve found the area that ticks all these "Location, Location, Location" boxes, it’s time to partner with an astute, trustworthy property professional who can help you make informed decisions that align with your investment goals and lifestyle needs.
At Just Property, we are committed to helping you find the perfect property in the right location, ensuring that your investment will grow and contribute to your family’s future prosperity.