Stellar investment returns for sellers of seaboard properties

SELLERS of prime Atlantic seaboard property in the suburbs of Fresnaye, Bantry Bay and Clifton have realised stellar investment returns of 21 to 24 percent on freehold homes and 16 to 20 percent on sectional-title properties sold over the past 18 months in the price band of R10 million and above, says Seeff ’s managing director for the areas, Ian Slot.

“The Seeff study is based on freehold and sectional- title property sales between January last year and the end of June this year, and an average holding period upwards of five to six years.

The study shows that 36 freehold and sectional- title properties, with an annual average holding period of just over six years that were sold during the period, yielded a gross profit of almost R400m for the sellers.

“There are obviously exceptions, for instance, owners who needed to sell urgently may have had minimal capital growth, or improvements or renovations would boost the capital growth value. But the study shows that on the whole, sellers are still realising significant investment returns.

“Although still nowhere near the pre-2007/8 levels, in the past year we have seen a noteworthy improvement in investor sentiment at the top end of the market,” says Slot.

He says about 127 properties worth more than R3.5 billion were sold in these suburbs for the period under review. Based on this, freehold property sales in the R10m to R20m price band showed an average investment return of 21 percent a year, whereas those above the R20m mark yielded 24 percent.

Fresnaye came out tops at an average yield of 23 percent in the R10m to R20m price category, and 32 percent above this price band. Bantry Bay yielded 21 and 24 percent and Clifton 20 and 21 percent respectively in the two price bands.

“A home in Avenue Des Huguenots, Fresnaye, which was bought in early 2005 for R3.3m was sold earlier this year for R21m, yielding an average a nnual c apit a l g r owth o f 26 percent and a profit of R17.7m for the seller,” says Slot.

“A Clifton villa in Ocean View Drive, which was also bought in 2005 for R5.4m, was recently resold for R19m, an increase of 21 percent and a profit of R13.6m.”

Slot says that Clifton sect i onal- t i t l e property sales showed an average yield of 20 percent over a six-year period, and Bantry Bay sales yielded 16 percent on average.

“A 144m apartment in Heronwater on the seaside of Victoria Road in Clifton, was bought in early 2009 for R7.5m and was resold earlier this year for R13.5m, which is a 17percent return in under four years. A 167m2 apartment in Bantry Place overlooking the sea was bought in mid-2011 for R8.5m and was resold earlier this year for R12.3m – a 31 percent increase in price and a profit of R3.8m in just more than one year.

A 518m2 penthouse at The President in Bantry Bay, which was bought in mid-1992 for just over R3m, was resold by Seeff late last year for R23.5m, yielding a profit of over R20m.”

Slot says the study illustrates that people who have bought smart and held on to their properties for five years or more have had significant investment returns.

“This is very much in line with the findings of the 2013 Knight Frank Wealth Report, which notes that especially in view of the continued global economic instability, rich people are investing in more luxury homes as a safe haven.

According to the report, just more than 25 percent of their total net worth was accounted for by their main residence and second homes in the past year. And 25 percent of respondents indicated that they would add to their residential portfolios this year, compared with only 19 percent last year.

“On a regional basis, 40 percent of Middle Eastern and African and 34 percent of Asian respondents indicated that they were likely to invest in property this year, compared with 17 percent of European and US respondents.

African, Asian and Middle Eastern residential property investment on the Atlantic seaboard and in the Cape Town city bowl more than doubled during the first half of this year, compared with the whole of last year,” says Slot.

VALUE: Sellers of properties priced above R10m in suburbs like Clifton have had returns on investment of between 20 and 21 percent over five to six years, says real estate agency Seeff.