When times are tough, in­vest in de­sir­able rental mar­ket

Weekend Argus (Saturday Edition) - - PROPERTY -

RES­I­DEN­TIAL prop­er­ties that achieve good rental re­turns re­main a de­sir­able in­vest­ment op­tion for South African port­fo­lios dur­ing these tough eco­nomic times, says Rob Ste­fanutto, man­ag­ing di­rec­tor of Do­gon Group Prop­er­ties.

He says one only has to look at Ma­zlow’s hi­er­ar­chy of needs to see that dur­ing tough eco­nomic times peo­ple can do with­out a new car, a hol­i­day or new clothes but they will al­ways need shel­ter. Rent­ing a prop­erty re­mains nec­es­sary.

“Due to the re­al­ity that less prop­erty may sell dur­ing tough eco­nomic times, it makes the avail­able long-term rental mar­ket more at­trac­tive to a larger group of con­sumers who are un­able to pur­chase at that time due to fi­nan­cial con­straints,” he says.

“There is pres­sure on avail­able rental stock, es­pe­cially in the lower to mid-range mar­kets where the bulk of in­vestors pur­chase for rental re­turns.”

Ste­fanutto ac­knowl­edges that while a re­ces­sion is not a good time to take risks, for those peo­ple who are in a po­si­tion to pur­chase ad­di­tional prop­er­ties for rental in­come, it is a good in­vest­ment, pro­vided the in­vest­ment is made on the cor­rect type of prop­erty.

He says smaller prop­er­ties in the mid-range mar­kets are the most lu­cra­tive as they tend to have the largest pool of ten­ants who are seek­ing to rent.

“You will al­ways have de­mand for the rental prop­erty and you should not suf­fer va­can­cies which ham­per rental re­turns.”

Ste­fanutto says Gaut­eng tends to have bet­ter yields than Cape Town but Cape Town out-per­forms Gaut­eng on cap­i­tal growth.

“Buy­ers should look to pur­chase in pop­u­lar ar­eas close to schools, trans­port and con­ve­niences such as shop­ping cen­tres and med­i­cal fa­cil­i­ties,” he says.

An ex­am­ple is the south­ern sub­urbs of Cape Town, which are be­com­ing in­creas­ingly pop­u­lar as peo­ple are drawn to the lo­ca­tion and ac­cess to good school­ing and work.

“Do­gon’s sales of­fice in this area ex­pe­ri­enced a 55% increase in sales com­pared to the pre­vi­ous year, show­ing the ris­ing pop­u­lar­ity of this area.”

Re­lo­ca­tion from other prov­inces is fur­ther driv­ing de­mand for rental prop­er­ties in the West­ern Cape.

Ste­fanutto says the de­mand for rental prop­erty in the province is driven by high-net­worth in­di­vid­u­als mov­ing to take ad­van­tage of the life­style of­fered, while the main bread win­ners move back and forth be­tween the Cape and Gaut­eng for work.

“This is an un­usual ad­di­tion to the rental model and has a dual ef­fect as these com­muters usu­ally rent homes in the West­ern Cape prior to buy­ing a home in the province, while also rent­ing smaller apart­ments in Gaut­eng to stay in dur­ing the week.”

In Do­gon’s ex­pe­ri­ence, the drought has not yet had a no­tice­able ef­fect on the value of Cape Town prop­er­ties and has not slowed de­mand, says Ste­fanutto.

“Re­ces­sion­ary con­di­tions mean we are mov­ing to­wards a buyer’s mar­ket.

“For those peo­ple for­tu­nate enough to be able to pur­chase ad­di­tional prop­erty, now is a good time to do so, safe in the knowl­edge that prop­er­ties which bring in rental re­turns will re­main suc­cess­ful ad­di­tions to any port­fo­lio.”

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.