Although there are still good returns to be made in the SA property market in general, many property investors are at a crossroads as they mull just what sector of the market will provide the best returns.  

Rob Stefanutto, Director of Developments for Sotheby’s International Realty Atlantic Seaboard says, “The property market has been exceptionally kind to investors over the past 3 years with annual returns of up to 35% in many areas. 

“And although there are still profits to be made, the market is slowing and we can expect healthy, although more modest average price gains of 10-15% over the next several years.

“In my opinion, people who buy property as an investment or speculation would do well to focus on less popular suburbs like Woodstock and Sea Point. These areas were previously not seen as having the same investment potential, but are now starting to transform, making way for new urban chic developments, similarly to the way New York’s Meat Packing District started its transformation during the 80s.

“These up and coming areas close to the CBD are being cleaned up and offer the investor the opportunity to make greater profits in the long term. In Woodstock, it is still possible to pick up properties for around R2500/m², but with the influx of small businesses looking for ‘character space’ on the outskirts of town, demand is growing and as people move in and renovate, prices can only increase.”

Stafanutto adds that there is never a shortage of tenants for these properties, as these areas attract young professionals who want to be close to town but can’t afford rentals in the more established, mature areas.

“Developers are finding it increasingly difficult to find cost effective opportunities. Costs of developable land near the metropole areas of SA is on the increase, as less becomes available.  It is a matter of time before the land and building costs start to outstrip achievable unit prices in new developments. This can only but drive the second hand home market where, one can buy and renovate for far less than the cost of purchasing a new unit.

“It presently costs around R7000 –R8000/m² to build high quality buildings and a finished unit in a new development in places like Green Point and Sea Point will cost at least R 17 000/m² - the cost of building alone will drive the second-hand market and prices can therefore only increase in this sector.

“My advice to property investors is that having had several good years, the time has come to take profits in the more popular areas and reassess where available capital should re-enter the market, as there may be better opportunities in either the less popular property areas or other asset classes in the short term. Creation of wealth is always determined by the spread of investment of which property needs to be a part of a balanced portfolio.”

- ENDS

ISSUED BY:                       LANGE STRATEGIC COMMUNICATIONS

ON BEHALF OF:               SOTHEBY'S INTERNATIONAL REALTY

For further information please contact Rob Stefanutto at Sotheby's International Realty on 083 556 6861 or Robyn Creer at Lange on (021) 448 7407