Ladder before prices rise again
which develops property estates, says homebuyers are increasingly looking for convenience and they want to be near work, or on a good route to work, as traffic issues continue to play a significant role in property decisions.
This has made precinct developments increasingly popular. They also range in size and price, offering potential homebuyers choice depending on their pocket and on the size of their families.
Cabanita says buyers should check out which company is backing any development they buy into and make sure they are well-known and reputable. They should also be aware of what features are included and should ensure they know if there is any chance of delays.
“When people are buying off-plan, developers often don’t make buyers aware that there could be delays, particularly with council issues which are often out of the developers’ control,” she says.
While some buyers are opting for these estate developments, many others are flocking to the inner cities, where massive development has taken place on the back of urbanisation and demand for accommodation near to where they work and spend their leisure time.
And they are not only looking at investing in a home for themselves.
With the Johannesburg Development Agency working with developers to repurpose commercial and office buildings for residential use, like in Maboneng and Braamfontein, some property buyers are realising that an investment in property can be a good business proposition and earn them recurring income.
Paul Jackson, the CEO of TUHF, which funds property developers, says that a few years ago TUHF was financing the acquisition of rundown flats which were stripped and refurbished.
“Increasingly, our developers have gone to conversions – office to residential and light industrials to residential. They are buying below replacement cost and doing things with them [the properties],” Jackson says.
Interestingly, it is not just established developers, architects and construction companies who are buying these developments as a business opportunity.
“We are financing people who used to be housekeepers, plumbers, artisans and clerks who have realised that with access to financing, they can become inner city developers.
“The products themselves are often good standard fare, but the entrepreneurial story is fascinating,” Jackson says.
Nano Makwela, co-founder and senior portfolio manager at TUHF, says clients favour the “corridors of freedom” – transport-oriented development in areas identified by the city as being on transport arteries like Rea Vaya, or potential transport routes identified by the city.
These vary significantly in size from houses to small blocks of flats and bigger developments.
Apart from well-known inner city nodes like Maboneng and Braamfontein, Makwela says developers are buying and renovating in areas like Bez Valley, Bertrams, Doornfontein, Yeoville, Hillbrow and Denver.
While big developments like Waterfall are only for big developers with deep pockets (and often commercial property investors too), there are many projects going ahead for entrepreneurs thinking about rental housing as a business.
“We back a lot of people who wouldn’t have a hope if they were getting conventional financing. One of our clients couldn’t get past reception at a bank. Now she has 130 students paying her R2 800 a month in rent.”
TUHF has lent R4.5-billion over the past four years and Jackson and Makwela claim their loan book has “outcompeted commercial banks”.
“We believe the dawn of demolish and rebuild is breaking,” says Jackson. There are developments from Regents Park to Malvern and Turffontein, and while there has been significant inner city development, not everyone wants to live in the city, and so development is taking place across cities.
According to TUHF, research has shown that people still prefer living in “conventional areas” near parks, schools, clinics and shops.
Maboneng, for example, is more of an industrial area, and while it is starting to change character, and while there is certainly a market for property there, it has not changed sufficiently for people who like to live in conventional residential areas.
Jackson warns that while it has become easier, in some cases, for up-and-coming developers to get funding, municipal service charges in Joburg are “out of control and well above inflation” and may add significantly to expenses when buying – whether it is buying one’s own home or buying to let.
The City of Johannesburg’s new valuation roll, issued in February, sent shockwaves through the city’s residents whose properties were revalued, with some values going up exponentially. In addition, municipal charges have been rising above inflation for some years.
It is not just increased running costs that developers have to worry about. They are also having to make additional investment in things like smart meters and watersaving devices. Tenants are also increasingly expecting Wi-Fi and even fibre.
Jackson also warns that the increase in property development has resulted in hundreds of people “doing their own thing” and tenants may be moving into rebuilds which don’t necessarily have planning approval.
FNB is expecting a stronger property market in 2018. It says there appears to be increased confidence in SA boosted by leadership changes, the rand continues to perform strongly and there is, it says, an increased possibility that interest rates will go down.
“Nothing economically looks very strong, just mildly better than where we come from, and ‘mildly better’ for the economy probably means ‘mildly better’ for the housing market,” the bank says.