Covid calls for classic investment strategy in Jozi rental market
The impact of Covid-19 precipitated multiple unforeseen market shifts that had a significant impact on the real estate industry, said Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg, adding that although real estate As the rental market remains a viable investment, it has become essential for potential landlords to do their homework and heed professional advice.
âBuying investors are understandably cautious at the moment, but savvy investors recognize that we are currently in a perfect storm to implement the classic ‘buy low and sell high’ investment strategy.
âThey view real estate as a medium to long term investment and are aware that the current surplus of available properties in many areas and the decline in rental yields is a temporary market response to the impact of the pandemic. .
âThat once regional and international travel begins to normalize, many long-term rental properties will revert to short-term rentals again, which in turn will stabilize prices. In other words, it’s a brief window of opportunity to âmake hay while the sun is shiningâ.
Additional incentives for investors
Odendaal adds that there are additional incentives for investors as well, including low interest rates, a very wide choice of properties and the fact that banks have also come to the party.
“According to a recent ooba report, in June the year-on-year value of home loans granted was 54% up from the same period last year, bank approval rates increased by 4% and 100% bank approval rates for purchase loans. value bonds were 2% higher.
Odendaal says the trick is to buy the right property in the right area, and it’s not as easy as it sounds as there are many factors to consider.
âThe best place to start is to talk to rental agents in the areas you are considering buying, because they will know exactly what potential tenants are looking for and how much they are willing to pay.
âFor example, if a neighborhood is popular with young families, an older two or three bedroom apartment would be a better investment than a one bedroom apartment, even though it is absolutely beautiful and has better finishes.
âSo it’s essential to thoroughly research an area to determine which properties are most in demand, which features are high on tenant wishlists, and appoint an experienced rental agent who has the resources to properly screen potential tenants and effectively manage property and rent payments. “
Most active middle market
Debbie Minnie, the group’s rental specialist in Randburg’s Inner Circle, says the mid-market is by far the most active right now, with secure and pet-friendly family homes being particularly popular.
âAt the lower end of the R8,000 to R15,000 price bracket, there is a preference for stand-alone, low-maintenance garden simplexes in secure complexes, preferably with closed garages, equipped cooking and gas ovens, reliable connectivity and easy-care finishes without a mat.
âAt the top of that bracket, the majority of renters want independent homes, preferably with a cottage to accommodate an extended family and enough space to create a dedicated home office.
Minnie recommends investors looking to break into the Randburg mid-market to consider properties in Fairland, Cresta and Blackheath, which are popular rental areas, offer good value for money and a wide selection of properties that will appeal to potential tenants. .
According to Tasmyn Walker, Minnie’s counterpart in the parks, from Hurlingham to Westcliff, the mid-market in these suburbs is also the most active with properties between R18,000 and R25,000 experiencing the highest demand.
âThe majority of our current inquiries come from clients who are either looking for their first family home or from people who have sold their property and plan to emigrate within a year.
âMost ask for pet-friendly homes with a back-up power supply and gas stove, and although swimming pools are no longer a priority for most local buyers, they are still very popular with international customers. “
Attract families, young professionals
These suburbs attract both families and young aspiring professionals, so investors should buy property that appeals to one or another demographic.
âIf you want to attract families, the best option would be a spacious three bedroom cluster house in a secure and established complex with good security and amenities like a swimming pool or gym.
âYoung professionals tend to prefer the convenience of a closed and closed apartment and until the advent of Covid, two-bedroom accommodation would have done the trick.
“However, with more and more people working from home, these tenants now prefer three-bedroom units to allow for a home office and other assets are garages and secure storage rooms.”
The corporate rental market hit hard by the pandemic
Over the millennium, Sandton’s growing importance as South Africa’s financial hub has fueled a booming corporate rental market, with companies paying top dollar for top-notch properties in locations. prime locations, but recent trade and travel restrictions have had a significant impact on this industry.
Debbie Williams, the group’s corporate leasing specialist in Morningside, Duxberry, River Club, Benmore, Hyde Park and Sandhurst, says this segment of the market has been hit particularly hard by the pandemic.
âEighteen months of travel restrictions and intermittent lockdowns both here and abroad, compounded by the economic fallout from the pandemic, have resulted in a significant drop in corporate missions and most of those arriving. still have been subject to budget cuts.
“As a result, homes priced above R 45,000 are much more difficult to rent at the moment, as there is still movement in the R 30,000 to R 45,000 price range and properties at good prices that tick all the right boxes are still in place.
“And for most tenants in this exclusive market, these boxes include good security with access controlled by a ramp, staff quarters, a large garden, contemporary design and modern interiors.”
Increased demand for furnished accommodation
Williams adds that there has also been an increase in demand for furnished properties in this industry, both from corporate clients and from people moving, whether to new areas or overseas and that They prefer to avoid the hassle and cost of two big moves in a short period of time.
âMany international companies are not contributing as much to relocation costs as they used to be, so relocation agencies have been tasked with finding furnished properties – and these are very rare.
âPayprop’s most recent quarterly report found that nationwide, rent growth saw the first increase in nearly two years in the first quarter of 2021, with the average rent in Gauteng being R8,390, 0.7% more than the same period last year and perpetually the second highest after the Western Cape.
âThese data are not only encouraging, but also underline the resilience and cyclical nature of the market and its long-term investment potential,â said Odendaal.
âAt the end of the day, an investment property is a great, cost-effective way to get a foot on the property ladder, as rental income will typically cover a large portion of mortgage payments or, if not bonded, it will pay off. provide an additional source of income.
âAnd the old adage still applies; that right stock at the right price and in the right place will always result in a good number of inquiries and the successful rental of a property.