Property investors moving into Newcastle

Strategically positioned midway between the cities of Johannesburg and Durban, the town of Newcastle in Northern KwaZulu-Natal has seen an injection of capital investment over the past several years, with major retail development, the recommencement of key road infrastructure projects and a significant increase in confidence among residential property developers and investors.

This is according to Samantha Wade, Pam Golding Properties area principal in Newcastle, who says during the past three years, Newcastle’s property market has slowly but steadily climbed out of the recession.

“On the retail front, major development undertaken includes Newcastle Mall, which brought national chains such as Woolworths Food Store, Incredible Connection, Mugg & Bean and Trappers to the town.”

She says the new mall bustles with visitors from the area as well as surrounding smaller towns such as Dundee, Glencoe, Utrecht, Memel and even as far away as Vryheid, who come for a better shopping experience, enjoying the variety of choice the mall has to offer.

“Development along the Madadeni/Newcastle corridor continues to take place with the recent addition of a Builders Warehouse. On the other side of town, on the Memel Road corner, a development which includes an Ocean Basket, McDonalds, Nandos and Chicken Licken is soon to see the construction of a Super Spar, which is already at earthworks stage.”

Wade says in addition, UTI, a large courier franchise, has demonstrated confidence in Newcastle by establishing an outlet on the corner of the N11 and Albert Wessels Roads, while four major vehicle dealerships, Menmat, Fednissen, Fedauto and BMW have recently been acquired by out-of-town investor-owners.

She says a further sign of renewed confidence in the area is the re-commissioning of Siltech, a silicon factory situated about 20km from the town, which had closed down about two years ago.

Due to Newcastle’s strategic location between Johannesburg and Durban, the town is used as a regional base by a number of government departments, she says. The economic importance of the Memel Road conduit or R34, which spans approximately 100km linking Memel and Vrede in the Free State with Newcastle in KZN, has been revived.

“Recently, major roadworks began in order to upgrade this vital passage between Gauteng and KZN, with the impact of this still to unfold. However, the roadwork for the upgrade of the Newcastle/Ladysmith route is now complete.”

Wade says St Dominic’s Academy, a private school with an excellent reputation, has recently been acquired by a company called Curro, which, as part of its acquisition, is injecting a large amount of money into the upgrading of the school’s infrastructure, including the installation of the first astro-hockey turf in Northern KZN.

“Having been absent for some years, property developers are once again emerging and expressing an interest in acquiring vacant land to develop.”

However, she says vacant land available to buy in upscale areas is almost non-existent.

“There are some sites available in the affordable suburbs, but as these tend to be single stands measuring about 1 000sqm in extent and only large enough for a single residence, they are popular among individuals wanting to build their own homes.

Two townhouse developments situated in a popular suburb called Hutten Heights have sold exceptionally well. These are Parklands, where all six units have sold out, and Bishopscourt, where the first phase comprising five units is almost sold out.

Wade says the units in Parklands were priced at around R2 million for a four bedroom, face brick home of just over 300sqm, while the units in Bishopscourt are priced from R1.1 million upwards for 160sqm to 170sqm, depending on the size of the unit. There are nine units in total in the Bishopscourt development, with only one unit remaining available for purchase in phase one, and four in the second phase.

“As is traditional, the start of the new year usually brings increased activity in the residential property market, which continues through to the winter months of June and July, when movement tends to level off,” says Wade.

Homes in the R750 000 to R1 million price range are highly sought after, yet in short supply, making the two neighbourhoods of Sunnyridge and Pioneer Park more attractive to those still searching for affordable homes.

“Sunnyridge is predominantly a middle income area with the majority of properties formerly Iscor homes, while Pioneer Park represents a middle to upper income suburb.”

Wade says these suburbs are divided by price band into two areas with streets like Percy Riley, Paddock, upper Coronation, Mountford and Jones fetching prices between R900 000 and R1.6 million. Other roads such as John Parks, Dimmock, Van Niekerk, Moody and Doogen achieve prices from R750 000 to R950 000.

“Neither of these suburbs are new, but homes in these areas are considered good value for money,” she says.

Setting a minimum benchmark for Newcastle property prices are the areas of Amajuba Park, Ncandu and Barry Hertzog Park. Prices have, however, escalated over the past two years, and where previously homes could be had for as low as R500 000, now they are selling at around R750 000.

Two notable sales of R2.5 million each have been secured in sought-after Avairy Hill. The two sales occurred as a double-up with the seller becoming a buyer and making this his third property acquisition, two of which were investment properties.

Wade says residential property buyers in Newcastle are across the board, from young professionals and growing families to more mature buyers and also investors.

“The profile of our younger buyers is usually someone employed in a government department or a young professional, and because they are starting out in their careers and may relocate at some point in the future, they generally do not wish to commit to a large property, preferring a duplex unit or an apartment.”

As rentals are particularly scarce in this sector of the market, she says the lack of supply is fuelling sales to a large degree. Generally, rental stock is in high demand across all categories. An average three bedroom home can be rented for about R6 500 per month, while a townhouse in an upmarket area commands a monthly rental between R7 500 and R10 500.

“Sectional title townhouses are also highly sought after and hard to come by, even in the high-end market. There is also a substantial amount of movement with older homeowners downscaling and young, growing families wanting to upsize.”

Newcomers to the town, which currently comprise about 15% of our market, tend to rent first and buy later once they have better knowledge of the Newcastle property market,” she says.

Wade says a further option for buyers, especially those seeking to escape city life, is the small, quiet town of Utrecht, about 40km from Newcastle and 60km from Vryheid.

Utrecht is unique in that it is situated in a game reserve and surrounded by the Balele Mountains. It includes a dam, and the properties are mostly old farm-style homes, reasonably well maintained and situated on large erven measuring anywhere from 2 000sqm to 7 000sqm.

The average price of a three to four bedroom home here is from R600 000 to R800 000, but occasionally there are homes that sell for R400 000, and may require a bit of work. With only 934 homes in total, Utrecht has three schools, a retirement village, a Dutch Reformed Church, frail care facility and a hospital.

She says a current trend is to buy homes in Victoria Road, the main road linking the high demand suburbs and central town area, and convert them into professional offices.

“Business owners want their offices to have good road exposure and be able to offer their clients plenty of parking in an area uncluttered by street vendors and car guards and with low crime,” says Wade.

A notable sale was a B&B acquired by an orthodontist and lawyer for R2.35 million. Also moving into this stretch of road in the past few months is a Discovery consultant, beauty salon, two-way radio supplier and an estate agency.

A corner property has also been sold in this road to an investor/developer. The three bedroom house was purchased for R1.28 million and will be converted into offices and rented out.

Currently, nine sectional title apartments in a block on Victoria Road, comprising a mix of simplexes and duplexes priced from R795 000 to R840 000, are on the market.