Despite the challenges facing the South African property market, there are still many attractive investment opportunities available in all provinces, depending on the purchaser's needs.
According to Berry Everitt, CEO of the Chas Everitt International property group, one of the key factors influencing these opportunities is the state of the local government and it's ability to deliver services efficiently.
"One of the most attractive investment destinations in the South African property market at the moment is in the Western Cape. The region has seen a lot of inward migration due to it's good infrastructure planning and favorable business environment.
"Other attractive investment opportunities can be found in emerging markets with strong economic growth potential, such as Gauteng and KwaZulu-Natal. These regions offer good value for investors, as property prices have not yet reached their full potential," says Everitt.
In addition, the rise of technology and e-commerce has created new investment opportunities in the commercial and industrial property sectors, particularly in logistics and distribution centers.
'Holiday home investments remain attractive'
In the meantime Antonie Goosen, principal and founder of Meridian Realty, says semigration and holiday home investments remain attractive, resilient, and surprisingly buoyant at the moment.
"Low stock is continuing keep the property price stable and in some cases to drive the property price upwards. This is seen mainly in the luxury and high end market. The location of most semigrators remains the Western and Eastern Cape, specifically along the Garden Route, stretching 300km from Witsand in the Western Cape to Tsitsikamma Storms River in the Eastern Cape, as well as the Cape Winelands and Cape Metropole areas. Semigration has also stretched inland in the Western Cape to Greyton, in the Overberg, and McGregor, located in the Breede River valley.
"Semigration fuelled buying remains strong in the Karoo with more affordable properties available. Buying a property in these areas will remain a good investment in the long term with local and international buyers remaining strong in the area.
Goosen, says property investors looking to rent out properties could also look at buying properties in the low to mid-market, to take advantage of the rental uptick, emerging from the rise in inflation and interest rates. Rental inflation remains lower than headline inflation and is a viable option for many.
"An increasing number of people have opted to rent rather than buy as it provides flexibility, fixed monthly costs for a fixed period, and tenants can usually afford to rent a property of higher value than they may get bond approval for.
"Investors with the help of rental agents can successfully profit from these sort of properties if managed tightly from initial inspection to outgoing inspection. The location of these remain strong around our main cities with Cape Town and Gauteng showing strong rental uptake in areas close to work nodes and vibrant and trendy restaurants and craft industries," says Goosen.
Current market conditions have opened numerous lucrative investment avenues for property buyers in South Africa:
High Street Auctions Director Greg Dart, says the biggest returns countrywide are likely to be realised on strategic assets perfectly situated to benefit from leveraging both natural appreciation and forced appreciation.
“The property market fluctuates, but dips are temporary and in general bricks and mortar assets naturally appreciate over time.
“While that’s happening, savvy investors will maintain, upgrade and renovate their properties, ‘forcing’ appreciation by increasing the value of their assets.
“The strategy is sound across the budget scale. It also applies equally to business premises and residential real estate.”
Top Region
Dart says the best regional investment opportunities currently lie in the Western Cape, with Cape Town the biggest semigration drawcard.
In November last year, Lightstone reported that most South Africans semigrants were choosing the Western Cape as their destination.
“The business and lifestyle incentives being offered by the City of Cape Town are appealing: 60% less load-shedding than the rest of the country, a cash-for-power plan buying electricity from businesses that feed back into the grid and an across-the-board property rates relief package peaking at 52% for homes valued below R5 million.
“According to Lightstone, South Africa’s formal property stock volume totals 6.8 million and is valued at R6.1 trillion. The demand for property in the Western Cape is evident in that the province accounts for a substantial 29% of the national value, with only 18% of the stock,” says Dart.
“Cape Town’s annual residential property values have risen over the national average for several years, but apartments under R1m can still be found, and on the Western Seaboard, in the southern and the northern suburbs freehold properties are available for under R2m.
“Of course – if your wallet stretches that far – you could spend upwards of R100m on a luxury pad.
“According to New World Wealth’s 2023 Africa Wealth Report published by Henley & Partners on March 28th, SA’s five most expensive suburbs are in Cape Town. In descending order, they are Clifton at an average property price of R88 000m², Bantry Bay at R82 000m², Fresnaye at R60 000m², Camps Bay/Bakoven at R54 000m² and Llandudno at R52 000m².
“On the business front there’s already greater demand/supply parity in Cape Town’s commercial and industrial real estate market than anywhere else in the country, but that’s changing. Smart investors will move swiftly before it turns," says Dart.
Top property sectors
Dart says the investment appeal of industrial property stretches far beyond the Western Cape, though.
“Covid vividly demonstrated our supply chain vulnerabilities, resulting in demand for networked infrastructure development to facilitate seamless product distribution through regional and local hubs.
“At the same time, rapid growth in online shopping has forced those companies to expand, directly competing with terrestrial retail suppliers for state-of-the art industrial warehousing in the major cities and outlying regional hubs.
“High Street is actively pursuing opportunities for investors in this asset class at the moment. The reasons are numerous; market strength, stability, resilience and long-term growth potential to name but a few.”
Dart says it’s not by accident that in both good times and bad, investors choose to anchor their portfolios in real estate. With a global market value of more than $326.5 trillion, property is the world’s most significant asset class and its worth is almost four times that of global GDP.
South Africa’s appetite for real estate matches the global market, Last year alone, property sales in SA totalled a staggering R409.8 billion, according to Lightstone.
Top value adds
Whether buying an industrial, retail, commercial or residential property, Dart says investors should always think about increasing value to reap larger returns.
Investments that will force appreciation include:
- Uninterrupted power: Invest in an independent power system to keep business operating. A smaller home system will also add to the resale value.
- Security features: Differing levels of security turn neighbourhood sale price comparisons into an “apples and oranges” exercise. According to Lightstone’s 2022 Estate Agents’ Sentiment Survey, security is the most important criteria for buyers. If your property has better (and more attractive) security than your neighbour's, it’ll be worth more.
- Crime rates: In urban areas, a low incidence of property crime in your area can be leveraged as a selling point, as can proactive crime prevention measures like number-plate reading cameras.
- Zoning/development potential: Development potential increases the value of your business or residential property. Understand exactly what you’re buying before you close the deal.
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