Renewed interest from up north
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.