The SA residential property market has been in a strong boom phase with rising prices and poor rents leading to falling returns, leading many to question whether investing in the asset class is still worthwhile.

Armed with an investment strategy fitting their profile, South Africans can still create wealth in the current property market, according to educationist Anton de Leeuw, CEO of property educationists YDL, who are hosting their Property Emperor Workshop in Durban this Saturday, 15th October.

“But”, says De Leeuw, “good buys are becoming more difficult to find and requires a lot of leg work”. SA is experiencing yield contraction, meaning that the yields between prime and non-prime areas are narrowing. 

This means that investors are increasingly eyeing inner cities in the pursuit of high returns. But, higher returns often come with higher risk. “Know thyself” says de Leeuw.  “Apart from the state of the market, investors also need to understand their propensity for risk and fit their cloth accordingly. This will guide them to purchase in areas and price brackets where they feel comfortable”.

The opportunities in the inner cities are partly a result of SA having a two-speed house market. The average house price may be R690 000 according to Absa, but they only cover the established house market of about 1,5m homes. “The broad average price is probably closer to R100 000 if the 6,8m homes in townships, inner cities and tribal trusts lands outside the house market are included”, says De Leeuw.

This means many untapped opportunities as the primary and secondary markets move closer together. “South Africa is awash with opportunities and our special circumstance will ensure it is for quite a few years,” he adds. “The best opportunities will be in inner cities and townships on the edge of the established market that are drawn into it as estate agents and banks move into those areas.”

According to Neville Schaefer, CEO of Trafalgar, Durban Inner City properties have out-performed all other inner cities in South Africa, with rentals rising by 15,8 % on average.  Sales in the Durban Inner City have totaled 2 556 units in the period from 2000 to 2004.

Schaefer’s research shows that Durban’s inner city attracts mainly female single tenants between the ages of 20 to 30. They rely on public transport and rent in the inner city for its accessibility to work, amenities and affordable rentals.

De Leeuw says that data on the residential market – and in particular inner cities - is sparse, often not comparable and fragmented. 

Apart from inner cities, the middle-priced market could still show strong growth and good returns. 

For those getting nervous about residential property, investing in the listed property sector or directly-held commercial property may be good alternatives, says De Leeuw, although the latter requires a degree of specialisation.   

To learn more about how to invest in a hot market, join YDL at their Property Emperor Workshop in Durban on 15th October at Riverside Hotel.  For more details go to www.ydl.co.za or phone Shreshini on 011-465-5673.