Investing in the Western Cape
Chairman, Lew Geffen Sotheby’s International Realty
WHAT MAKES THE ATLANTIC SEABOARD ATTRACTIVE?
Over the past 30 years, the growth on the Atlantic Seaboard has been exponential compared with other parts of the country, partly due to its unique setting. At least 3% to 4% of all sales are to overseas buyers so prices are steadily increasing. While the odd recession leads to stagnation, buying in this area is one of the best investments you can make.
WHAT KIND OF PROPERTY SHOULD INVESTORS CONSIDER?
It’s tricky to prescribe a specific investment – it has to suit many pockets – but sectional title units for the lock-up-and-go community and properties with commanding views and privacy are the most popular.
WHAT DOES R3 MILLION BUY YOU HERE?
You can buy three garages in Clifton or a decent two bedroom, 90m2 sectional title unit in Sea Point.
WHAT IS THE RETURN ON THIS INVESTMENT?
The return on investment (ROI) is amazing, depending on the time frame. Between 2008 and 2012, the recession diminished the ROI to a large extent, but the floodgates opened between 2012 and 2017. I would say, on average, the ROI has been approximately 20% per year, every year after 2012.
IS THE BUY-TO-LET MARKET SATURATED?
The demand for Atlantic Seaboard property is so strong that, despite the current recession, there is still a shortage of properties.
Director, Southern Suburbs
WHY INVEST IN THE SOUTHERN SUBURBS?
The return on investment is on par with the best areas in the country. There is limited stock due to the geographic limitations and reasonably constant demand, resulting in ever-increasing prices. There are a number of good schools and tertiary institutions nearby, which adds to the attraction. Kirstenbosch National Botanical Garden and Newlands Stadium are nearby, as are other attractions in Cape Town and the peninsula.
WHO INVESTS HERE?
It varies from parents buying an apartment for their school-leaving children to more mature people buying into a retirement estate. The area is popular with young families due to the good schools.
WHAT IS AVAILABLE FOR R3 MILLION?
It could vary from a three-bedroom cottage to a more modern three-bedroom home to a two- or three-bedroom apartment, depending on the area.
WHAT IS THE ROI?
For an owner-occupied property, the ROI on the full purchase price would typically vary somewhere between 6% and 12% per annum in present market conditions. This return can increase significantly if an older property is refurbished over time. If a property is purchased purely to let out, the annual rental return before tax could be anywhere
from 5% to 10% of the full purchase price. This depends on the purchase price and location, over and above the capital appreciation above.
WHAT TYPE OF PROPERTY IS MOST POPULAR HERE?
Estate properties are particularly popular with Gauteng clients. Val de Vie Lifestyle Estate, for instance, includes property offerings from lock-up-and-go units to a retirement village. There is still a strong demand from families for conventional residential properties in the Winelands due to the excellent schools.
WHAT WILL R3 MILLION BUY AN INVESTOR?
On larger estates, there are no more properties at this price, unless an investor is looking for a vacant building stand. In Paarl, there are some properties available in the suburbs, however they would mostly need renovation. In Stellenbosch, there are almost no properties in the traditional suburbs. Houses at this level would mainly be found in higher density developments such as Welgevonden or Nooitgedacht, or sectional title properties in the centre of Stellenbosch.
WHAT IS THE ROI?
The ROI in terms of rental income would generally be between 5% and 7%. However, capital growth could be between 5% and 10% per annum depending on the economy.
WHAT IS THE FUTURE OF ESTATE LIVING?
The demand is growing due to security requirements and the desire to be part of a community. Developers are looking at lifestyle offerings, not just security, such jogging and cycling tracks, sports facilities, restaurants and coffee bars to encourage a community and interaction among residents.