It has been a perplexing time for South Africa’s economy and property market.
Existing economic challenges together with unprecedented disruptions related to the pandemic have translated into a fragmented landscape for the property market. This involves not only economic considerations, but also significant impacts on the actual use of property and related demand trends.
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We caught up with the industry expert lectures of UCTs Property Development and Investment online short course, Justin Leve and Sean Godoy, to break down how formal market related studies "can help to streamline the learning process and build a solid foundation".
Key benefits of the 8-week short course aims to equip students with the skills needed to:
- Understand property as an asset class
- Analyse property market trends
- Identify sound property investment opportunities
- Determine how best to enter the property investment environment based on one’s unique circumstances.
The course also lays the foundations for understanding key elements that underpin property investment, examples being legal and regulatory factors, cash flow, valuation, financing and effective property management.
Property as an asset class
One of the key benefits of property as an asset class is often said to be its relative resilience to adverse economic conditions. While the sector is not completely immune, it can react differently and at a slower rate when compared to other asset classes. In addition, the diversity of the property market in terms of residential and commercial sectors, sub-sectors, location and price point offers a range of potential opportunities. It is an informed understanding of such fundamentals that can give an investor the edge.
Whether it be affordable housing in fringe markets or micro industrial spaces that cater to maker- entrepreneurs, investors should familiarise themselves with the scope of this exciting market. That said, residential buy-to-let or buy-to-flip remain two of the most accessible and popular investment strategies for individual investors looking for direct exposure to property and should not be overlooked.
Changing trends and consumer preferences, such as the influence of PropTech and the way we use and interact with property, can offer exciting opportunities for investors and aspiring entrepreneurs. Simply put, these changes often equate to a gap that needs to be filled.
Key property market trends
It is always key for property investors to be aware of macro-economic conditions and their potential impact on the property market, particularly in relation to the specific focus of their own strategy. At the same time, it is important to confront the reality of these conditions whether positive or negative and plan accordingly. The current reality is a scenario of low growth, increasing unemployment and added pressure on both businesses and consumers.
In adversity there can be opportunity though. A low interest rate environment has made financing cheaper for homebuyers and investors alike which has fueled activity in certain parts of the residential market, especially in the lower to middle price brackets. In addition, slowing house price growth means that current conditions lend themselves to a buyer’s market. Tenants and homebuyers are looking for value, and while buy-to-let landlords and developers may need to be flexible and creative at times, these needs can be met in a mutually beneficial way with the right approach.
To touch on the commercial market, while conditions are challenging, particularly for the office and retail sector, an established demand exists for flexible space and lease terms, which has become prevalent in the office sector. However, such trends are also gaining a foothold in other sectors such as retail, hospitality and warehousing.
For example, flexible space can take the form of a desk in a coworking space available hourly, dark kitchens (short-term kitchen facilities) or short-term warehouse space, all with added services and amenities. This is all part of the space-as-a-service trend which offers tenants or ‘users’ different ways to utilise property that often include elements of hospitality.
Impact of Covid-19
It is important to consider the ever-present and much-covered Covid-19 pandemic, which has arguably had one of the most sizeable impacts on economies and overall daily life in recorded history.
In the property market, impacts have been two-fold in the form of economic and use patterns. Sudden and strict lockdowns resulted in much more time spent at home and dramatically reduced occupancy and use of commercial properties, especially offices and shopping centres. As restrictions have eased and some normality has resumed, working-from-home (WFH) remains a sustained trend for those who are able to.
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Opportunities in Affordable Markets
In all of this, the fact remains that South Africa has very high levels of inequality and poverty, exacerbated by growing unemployment. The supply of decent and affordable housing is chronically short for many lower-income groups in a variety of areas. This presents a social need and an opportunity for investors to meet demand in a socially responsible yet profitable way. In other words, doing good financially while doing good socially.
Historically under-developed areas, as well as central CBDs and suburbs, require creative and flexible solutions for housing, as well as commercial space. Low-income earners and economic activity such as informal traders represent a major portion of the economy yet the opportunities they offer are often overlooked and misunderstood by property investors. Examples include affordable shared accommodation and facilities for informal traders and other community activities. This said, one cannot ignore the fact that unique risks and challenges exist that need to be thoroughly investigated.
Sustainability
A mere five years have passed since the World Economic Forum reported that over 40% of global energy was consumed by the property sector, with buildings contributing approximately 20% to global greenhouse gas emissions. Furthermore, over 3 billion tons, approximately 40% of the world’s raw materials, were attributable to buildings, not to mention their sizeable consumption of fresh water and waste generation.
Where sustainability in the built environment is concerned, the urgent primary objective is to reduce energy consumption and prevent further environmental damage through the depletion of natural resources. However, supplementary initiatives also exist to promote social inclusivity, embrace cultural diversity and create healthy working environments, which have become key drivers in property markets across the world and further galvanized by the pandemic.
Now more than ever we see sustainable design, construction, building materials as well as sustainable methods for operating and managing ‘green buildings’ being dominant themes reverberating throughout the built environment, seeking to achieve a ‘net zero’ impact on the natural environment as well as to enhance the well-being, health and communal interaction of building occupants.
READ: The hype of WFH | Who will return to the office and who won't?
It is not surprising, therefore, that sustainability should play an increasingly significant role in guiding investor’s decision-making, at both the macro and micro levels.
Whatever market or trend an investor chooses to pursue; it is crucial to ensure that sufficient knowledge is gathered, and robust research and preparation are carried out. Individual circumstances and constraints, as well as the specific property types and areas at hand, need to be fully understood in terms of their unique characteristics. Formal education, such as UCTs Property Development and Investment online short course can help to streamline the learning process and build a solid foundation.
For more of the key benefits of this Property Development and Investment Online Short Course, click here.
Lastly, each student on the course is given the opportunity to select and work with a real world property for the duration of the course, applying practical elements covered each week and culminating in a comprehensive investment proposal that addresses a commercially viable property development plan that is supported by the student’s market research, feasibility studies, team selection and projected financial returns.
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