Re­newed in­ter­est from up north

Weekend Argus (Saturday Edition) - - PROPERTY -

WITH AC­TIV­ITY re­tur ning to South Africa’s res­i­den­tial prop­erty mar­ket, it ap­pears that it is more than Cape Town’s beaches that Joburg­ers are af­ter this sum­mer.

Ac­cord­ing to David Solomon, chair man of Solomon Broth­ers In­vest­ment Hold­ings, the de­vel­oper of the R400 mil­lion Pep­per Club, most re­cent buy­ers in the de­vel­op­ment hail from Joburg.

“Up to 80 per­cent of new buy­ers of suites in the ho­tel are based in Joburg. This in­di­cates the sig­nif­i­cant re­newal of in­ter­est in the Cape Town prop­erty mar­ket by in­vestors up north,” says Solomon.

He says al­though Gaut­engers have al­ways been keen buy­ers of Cape Town prop­erty, the in­ter­est in the city dwin­dled over the past few years as rental yields strug­gled to match those avail­able in Joburg.

“Be­fore the mar­ket down­turn, rental re­turns were of­ten as low as 3-5 per­cent a year of the value of the prop­erty. This fell far short of the prime in­ter­est rate, which at one point was as high as 15.5 per­cent. Once you add in man­age­ment fees, levies, rates and taxes it be­came clear that many buy-to-let prop­er­ties no longer of­fered the best value around.

“How­ever, with prop­erty val­ues in the city hav­ing pulled back over the past 18 months and in­ter­est rates more than 30 per­cent lower than their highs in June 2008, the value propo­si­tion for in­vestors is sig­nif­i­cantly more favourable.“

Solomon says Pep­per Club in­vestors are also el­i­gi­ble for some ben­e­fi­cial in­come tax al­lowances which can be used to re­duce tax li­a­bil­ity on in­come from other sources. As the ho­tel falls within a des­ig­nated Ur­ban De­vel­op­ment Zone, in­vestors are of­fered a 55 per­cent tax in­cen­tive on the pur­chase of in­di­vid­ual units, which helps to re­duce their tax­able in­come and can also be car­ried for­ward as an ac­cu­mu­lated tax loss.

EYE-CATCH­ING: Artist’s im­pres­sion of the pent­house deck at the Pep­per Club, which is due to open in March.

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