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P R O P E R T Y NEIGHBOURHOOD retail centres can be a great investment opportunity for property buyers. PICTURE: PXHERE
Low interest rates see first-time buyers rise
T LOCAL SHOPPING CENTRES BETTER OFF THE RECENT tight economic times have seen big retail centres experience a reduction in income from rents, turnover and profit. This has led to a loss of tenants, growing vacancies and further reductions in profit. However, community retail centres have not experienced this to the same degree, says Gregg Huntingford, chief executive of Spire Property Management. “Neighbourhood retail centres cannot be beaten in terms of convenience. Consumers living in the nearby suburbs will frequent their local centre almost daily to purchase household goods and groceries, enjoy a cup of coffee or a meal, and use services offered, such as a laundromat or hairdresser.” He says these smaller centres do not struggle as much with vacant space as the larger centres do, because the rents are more affordable as they often operate on a gross rental structure rather than a turnover-based structure. “This is appealing to entrepreneurs and smallbusiness owners who are often daunted by the high costs associated with renting retail space in a large shopping centre. Because of this, smaller retail centres hardly ever see vacancies, and tenant turnover is very small.” However, Huntingford cautions that the tenant mix in a community-based
retail centre needs to be well planned if the centre is to flourish. “Shops and services need to be matched to the affluence levels and the needs of the surrounding neighbourhoods. Offerings such as gyms; garden centres; pet shops; health and beauty salons; art galleries and family restaurants with outdoor play areas are all examples of tenants that are not easily accommodated in large shopping malls but which offer a shopping experience in line with what consumers want.” He says experience has shown consumers increasingly want a shopping/retail experience so smaller centres can remain relevant by offering amenities that fulfil this. “Worth noting is that, as certain urban nodes and suburbs grow and evolve, we often see a demographic shift in residents within the surrounding areas. “A shifting demographic can mean the local retail centre no longer meets the requirements or needs of its customers. The answer is that centres need to evolve and look at their tenant mix to ensure they are offering local customers what they need. “All of this sees neighbourhood retail centres being a great investment opportunity for property buyers who are looking to add to their commercial portfolio.”
N E W S
HE NUMBER of first-time buyers has been edging upwards in the past four years, as a percentage of transfers, following years of consistency in the market, says Mike Lehabe, head of financial services at Lightstone. First-time buyers were steady at 32% to 33% from 2014 to 2018, then edged up to 34% in 2019, before jumping to 37% in 2020 and last year. “The historically low interest rates which the SA Reserve Bank introduced in response to the economic fallout of Covid-19 certainly spurred buyers into the market.” Nevertheless, he says, the rise of first-time buyers in percentage terms must be seen against the total numbers of transfers drifting downwards from 2015 to 2019, with a sharp drop in 2020 as the hard lockdown took a toll on the market.
The jump in numbers last year in part reflects the pent-up demand playing out as lockdown conditions eased. Repeat buyers have reduced in both percentage terms and actual numbers. In 2015, about 270 189 transfers were recorded, of which 181 026 (67%) were repeat buys. In 2019, just prior to the pandemic, repeat buyers had slipped to 162 688 (66%) of total transfers. Lehabe says the volume of bonded transfers for both first-time and repeat buyers has increased since 2015, with a slight decrease in 2020. “First-time buyers are more likely to need a bond than repeat buyers, with the percentage of bonded transfers increasing sharply from 2017 and peaking at 72% in 2021.” He adds first-time buyers on the coast have
been choosing the Western Cape as their preferred option since 2014 and this trend spiked last year as the market began recovering from the lockdowns of 2020. “Favourable interest rates, coupled with remote working and semigration, are becoming a more pronounced feature of the residential market and the Western Cape’s reputation for better-run municipalities is also contributing to the pull of the region,” Lehabe says. First-time buyers of inland properties overwhelmingly bought in Gauteng, he says. “Again, it is worth noting the spike in 2021 as first-time buyers took advantage of the historically favourable interest rates and the market adjusted for 2020, when hard lockdowns brought house sales to a trickle for a while.”
THE WESTERN Cape has been the preferred coastal province for first-time buyers for years. PICTURE: MATTHEW DIX/UNSPLASH
Patience, financial d iscipline vital
RATHER save up to pay the upfront costs of buying a home than take out additional credit. PICTURE: STEVE BUISSINNE/PIXABAY WHEN purchasing a property, many buyers focus on whether they can afford the purchase price but fail to consider whether they can cover the various upfront costs involved in the purchase, such as transfer duties and bond registration fees. There are several financing options available to buyers who do not have those funds readily available, but Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa, says the best option is to wait until you have enough saved to cover
these costs without taking out any additional forms of credit. “While there are several financing options available, including personal loans or 105% home loans, any form of credit to cover these costs will just amount to higher monthly debt repayments and money lost due to interest charges. “This becomes especially worrying under the current economic circumstances where inflation is shrinking households’ disposable income levels and interest rates are climbing, making debt more expensive.” Instead of taking out further loans, those who already own a home could leverage the sale of the home to afford the costs of buying a new home. If the money from the sale of the home has already been received before the homeowner has put in an offer on a new home, buyers can simply use that cash to cover the bond and transfer costs on the new property. Those who still need to sell the property to pay
for the new home could opt for bridging finance before their home is sold, says Carl Coetzee, chief executive of BetterBond. “This is a short-term finance option that can be quickly and easily arranged. You are advanced a portion of the money owing to you from the sale of your property, which bridges the gap between your current cash shortfall and your future payout on registration of transfer. “With bridging finance, the money is advanced almost immediately and you pay it back when the transfer goes through. This affords you the financial freedom to pay for things such as conveyancing and transfer fees; municipal rates; taxes and levies or even renovation costs.” While there are many options available to buyers who need to cover the upfront costs of purchasing a home, Goslett stresses that patience and financial discipline are still your best bet to enjoy greater financial freedom.
BUYING PROPERTY WITH A FRIEND? MAKE SURE YOU HAVE A CONTRACT
JOINT buying is a popular way for young people to get a foot on the property ladder but it does have risks. PICTURE: ALLGO/UNSPLASH
MANY people want to invest in property but not everyone can afford to buy a house, apartment or piece of land. Co-ownership for investment purposes is, therefore, a good way to get on to the property ownership ladder. However, it is not something to jump into blindly, says Skoko Sebola, principal at Leapfrog Midrand Owning property with a friend, sibling or other family members can be tricky, although it is becoming a popular way for younger people to get into the market. “It’s becoming increasingly difficult for young people to secure the capital needed to own their own homes. This is why we’re seeing more of them go into co-ownership with a loved one, a friend or business partner.
“It’s a good starting point and, after the initial payments and fees, often works out the same as renting a place together.” But, he says, you need to sign a co-ownership contract if this is the route you are going. “A lawyer will be able to assist. A contract will detail payment arrangements, what happens in the event of a sale, what happens if one owner dies or is unable to pay. This is just a snippet of what needs to go into a co-ownership agreement.” Sebola adds several people can co-own one property. “Of course, the more people you have involved, the less profit you get in a sale and the more admin there will be in the ownership process and when making decisions on what to do on the property.”
