PROPERTY NEWS - Many investors are considering the appeal of prime sectors of the Western Cape residential market in building a property portfolio.
Aiming for capital growth, accompanied by an income stream from letting, they are attracted by the region's track record as a relatively safe property haven.
But, as with all investments, it is vital to do through research on earnings potential and have a well-thought-out strategy, says Pam Golding Properties MD for the Western Cape, Laurie Wener.
Considerations include how you are going to fund your property, how much risk you want to take, understanding what you want to achieve with your investment, and getting to know your tenant profile. Insights from experienced, well-respected property professionals can be invaluable.
The best an investor can hope for in terms of rental returns is from 8% down to 2% for long-term rentals (12 months and more), says Wener. Generally, the higher the value of the property, the lower the rental return. Most investors view rental returns as a secondary benefit to the capital returns.
“Smaller, lower-priced properties will yield a higher rate of rental return. Large properties yield lower rates of rental return, but can yield large capital growth in the medium to long-term (six years plus).”
Considerations include how you are going to fund your property, how much risk you want to take, understanding what you want to achieve with your investment, and getting to know your tenant profile. Insights from experienced, well-respected property professionals can be invaluable.
The best an investor can hope for in terms of rental returns is from 8% down to 2% for long-term rentals (12 months and more), says Wener. Generally, the higher the value of the property, the lower the rental return. Most investors view rental returns as a secondary benefit to the capital returns.
“Smaller, lower-priced properties will yield a higher rate of rental return. Large properties yield lower rates of rental return, but can yield large capital growth in the medium to long-term (six years plus).”
High demand
Smaller rental properties that are constantly in demand include one and two-bedroomed Atlantic Seaboard apartments, in areas such as Green Point and Mouille Point, and the CBD.
Smaller rental properties that are constantly in demand include one and two-bedroomed Atlantic Seaboard apartments, in areas such as Green Point and Mouille Point, and the CBD.
Young professionals want proximity to work, the V&A Waterfront, clubs and restaurants and the Green Point urban park.
Prime properties in areas such as Fresnaye, Bantry Bay and Clifton are considered the recession-proof jewels in the capital growth crown.
Prime properties in areas such as Fresnaye, Bantry Bay and Clifton are considered the recession-proof jewels in the capital growth crown.
For example, a Bakoven bungalow for R29m and a four-bedroom Clifton apartment for R36m were among the half a billion rands worth of agreements of sale written by Pam Golding Properties in the Atlantic Seaboard and the Cape Town City Bowl area during November and December alone.
Typically, seasonal or holiday homes may yield excellent rental returns during the peak summer season. However, these can dwindle to very little in low season, and agents’ fees on short-term rentals are about double those on long-term rentals.
It is vital to put in the groundwork and study trends in the areas before you buy to rent, understanding the best locations and nuances of the various suburbs. Determine your tenant profile and gauge demand.
Your market may be young professionals wanting 'yuppie pads' in the central city, families needing spacious accommodation close to schools, in areas such as Rondebosch and Newlands in Cape Town, or those scaling down and wanting the convenience of an apartment on the Atlantic Seaboard while still maintaining a high standard of living. In all areas, security comes at a premium.
Typically, seasonal or holiday homes may yield excellent rental returns during the peak summer season. However, these can dwindle to very little in low season, and agents’ fees on short-term rentals are about double those on long-term rentals.
It is vital to put in the groundwork and study trends in the areas before you buy to rent, understanding the best locations and nuances of the various suburbs. Determine your tenant profile and gauge demand.
Your market may be young professionals wanting 'yuppie pads' in the central city, families needing spacious accommodation close to schools, in areas such as Rondebosch and Newlands in Cape Town, or those scaling down and wanting the convenience of an apartment on the Atlantic Seaboard while still maintaining a high standard of living. In all areas, security comes at a premium.
