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MORE people should be taking advantage of current property market conditions to become investors. PICTURE: DHYAMIS KLEBER/PEXELS
Letter from the editor AS A RENTER, I have managed to live in two of the most expensive parts of Cape Town – Camps Bay and Clifton – relatively cheaply. In fact, I ended up living in Camps Bay, falling asleep to the sound of the ocean and being able to walk to the beach, paying less than I would have had I rented similar accommodation anywhere else in the city centre. My rich friends, who owned a mansion close by, would drop me off after a night out and say how envious they were of my carefree existence – no levies or rates and taxes; no having to fix things when they broke; no hassle of tenants – and I still had the same view as they did. As a renter, I was free, they said. However, the big difference is as they and I leave the area for greener pastures (we hope), I leave with the suitcase with which I arrived, and they leave with over R30 million in their pocket after an initial R5 million investment (plus numerous renovations) all those years ago. Some may argue I got to stay in the most wonderful spot, and that was worth more than millions and, of course, I could never have afforded to buy there. Others may say you need to have money in the first instance to grow money. Which brings me to the focus of this week’s feature – alternative ways to get on to the property ladder, including renting in an area you love and buying in one you can afford – areas which have also shown immense growth in property prices over the years. More people I know are going for this option in their desire to own property. Not every property you buy has to be one in which you live and the buy-to-let market is thriving. One only has to look at the approximately 6.6 million residential properties registered at the Deeds Office, of which just over 3.3 million are occupied by tenants. This, property investor Ben Malapile tells our writer Bonny Fourie, shows just how popular buy-to-let property investment is. Given my friends and my example of how we ended up leaving Camps Bay, it seems owning property is a no-brainer way to grow wealth. Warm regards
Vivian Warby
vivian.warby@inl.co.za
FIND US HERE: @property360.co.za
@property360_za
@property360.co.za
Great time to invest There are plenty of good opportunities for people to start a property portfolio BY BONNY FOURIE bronwyn.fourie@inl.co.za
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ROPERTY market
conditions might still be great for first-time buyers, but more people should be taking advantage of them to start an investment portfolio. And investing in property does not only mean buying with the intention to let, although this is still the most popular reason. Current conditions, with low interest rates, mean aspiring investors could purchase a second property for personal use, or even look at flipping it, which entails buying a property in need of TLC, renovating it, and then selling it for a profit. Aspiring homeowners who cannot afford to buy in an area where they would like to live, could also consider buying a property in an area they can afford, letting it, and using the rental income to pay their own rent in an area where they want to live. Whichever investment method you prefer, says Grant Smee, managing director of Only Realty, not enough people are taking advantage of the lower interest rates to buy investment properties. “The market is still very much driven by first-time buyers, and homeowners either relocating, upgrading their homes, or moving for lifestyle and convenience options.” Most of those who are investing
are either looking at the long or short-term rental market, the choice of which is made based on the property’s location. “Areas that are popular for short-term rentals are busy coastal hubs as well as business hubs facilitating regular business travel.” Investors obtaining holiday homes or buying for the purpose of flipping, he says, only make up a small portion of the general property market. However, in areas like the West Coast of the Western Cape, the Garden Route, the Eastern Cape outside PE and East London, and KwaZulu-Natal’s South Coast, “a significantly larger proportion of property purchases would relate to holiday home purchases, although these markets would still be driven by semigration”. Ultimately, property is still seen as a lucrative asset class and with properties selling at attractive prices, many investors are cashing in. “If financed correctly, property can become a great source of passive income. “In other cases, some want to purchase a holiday house for use at the end of the year, but want to derive income from the property when they aren’t there – so they opt for short-term letting,” Smee says. Echoing this, Paul Stevens, chief executive of Just Property, says the most obvious reason people invest in property is to create another income
stream, such as buy-to-let. In this space, there are residential and commercial options, as well as short and long-term options. “Another reason to buy a property without intending to live in it is to rezone or refurbish. With shifting working arrangements as a result of Covid restrictions, this is something worth investigating in your area. “Shared workspaces where people can ‘hot desk’, and the increased demand for homes that allow for established remote working, provide opportunities.” He says rezoned and/or refurbished properties can be sold or rented for a profit if they are well-positioned, well-equipped and well-priced. Property investor Ben Malapile states that, of the approximately 6.6 million residential properties registered at the Deeds Office, just over 3.3 million are occupied by tenants. This shows just how popular buy-to-let property investment is. In addition to intentionally buying property to let to create an additional income stream, some investors enter this market as a result of their circumstances. “Some buy a starter home and, when the family grows, they decide to keep that home and let it. Some inherit properties from their parents, maybe try to sell, but
struggle and end up renting them.” As a result, he says the property investment market is made up of a large portion of unintentional landlords. Most landlords – intentional or not – prefer the long-term rental market. “Only about 10% actually have the capital to commit to buying and running a short-term rental or owning a holiday home and running a short-term rental when they are away.” Buyers of second properties bought as personal holiday homes are normally directors and shareholders of successful companies and other high-net-worth individuals, Malapile adds. A higher number of investors – about 10% – buy with the intention of flipping. This, he says, has been spurred by the number of property-flipping shows on TV. Another reason people might buy property without intending to live in it is when they purchase for someone else, like children, parents, siblings, spouses and in-laws. “Some buyers purchase farms and agricultural holdings to farm and sell their livestock but have no intention of living on them. “Some buyers also buy property to let it to students as fully/semifurnished student accommodation,” Malapile says.
DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods or services advertised within this edition. Copyright ANA Publishing. All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from ANA Publishing. The publishers are not responsible for any unsolicited material. Publisher Vasantha Angamuthu vasantha@africannewsagency.com Executive Editor Property and Environment Vivian Warby vivian.warby@inl.co.za Features Writer Bonny Fourie bronwyn.fourie@inl.co.za Design Kim Stone kim.stone@inl.co.za
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