Can property be a good investment?

Experienced players say the trick lies in the vision to see longer-term possibilities, writes Angela Graham

Olwin Kleve and her fiance, Garth van Reenen, dreamt of owning property on the coast, which they made happen by investing in land at Thesen Island in Knysna and at St Francis Links.

“We bought the Thesen land for R480 000 three years ago and spent R600 000 building a cottage on it. Now, we could probably sell it for R2-million.

“We bought St Francis for R340 000 and they‘re selling at R1-million and going up fast.

“We‘re hoping to make a minimum of R10 000 a month letting out our cottage to holiday-makers and this will double in peak season – about R150 000 a year on rent. It‘s ready to let, after a frustrating year making sure everything was perfectly built and decorated,” she says.

Olwin advises anyone looking to make money out of property to first look at its situation. She says: “Position – it‘s everything.”

The downside of investing in a holiday cottage to rent out is that you can‘t manage the people renting from you. “There‘ll be breakages, levies and upgrades, and the consistent worry about filling it,” she says.

Nevertheless, Olwin thinks it‘s possible to make a living investing in property.

“Initially, you will struggle if you are letting your properties because the rent doesn‘t always cover the bond and the levy, so you need another income. Once paid off, you can make a living. For example, you buy some and sell some to make a profit to push into the ones you keep,” she says.

“The trick is to get in on the ground floor of a new development – buy when the land first comes on sale, before people can see how great it looks. Or invest in areas that aren‘t popular yet. You have to have vision and you have to buy before it has reached that final state in order to get in cheaply and make money later on.”

Pam Golding Jeffreys Bay principal Keimpe Weistra says investors use a method of comparison to gauge whether oceanfront property is a good investment by calculating the cost/m².

“Investors compare property all along the South African coast by working out cost/m² and then make an informed decision as to where the best investments are. They look at added benefits and the developer‘s previous work to gauge whether they will get good returns. Discerning investors want oceanfront property, they know there is only so much left,” he says.

“For example, an oceanfront development opposite Jeffreys Bay main beach, Dolphin View, is selling at R10 000/m², a very good price considering the average going rate for South African oceanfront property of this nature is about R15 000/m².” The development is almost sold out before construction.

Coastal property is not the only way to go, though. Urban renewal has increased the trend to look for cheap properties in CBDs and then wait for their anticipated revival.

The Port Elizabeth CBD and surrounding area, including the harbour, is undergoing a major overhaul as Pierre Voges, CEO of the Mandela Bay Development Agency explains.

“The agency has been tasked with facilitating the redevelopment of the existing PE harbour for non-industrial purposes – similar to the process undertaken at the V&A Waterfront in Cape Town, but on a smaller scale.

“We are also revitalising the CBD, which has involved getting the basics right first. This entails introducing a permit system for informal traders, heightening security in the area (by appointing a security firm and installing security cameras) and assigning a private company to clean the area, boosting the municipality‘s efforts.

“People are already buying property on the assumption that things will change,” says Voges.

Ben Nyaumwe, managing director of Auspex Property in Port Elizabeth, says: “Investment in private or commercial property in this area is wise. Property is good value and there is a shortage of residential space.”

Nyaumwe says a two-bedroom flat in Central sells for about R250 000. In a few years time, this investment will most likely be worth between 20% and 50% more.

Upmarket flats or townhouses with views of the harbour can go for anywhere between R350 000 to R900 000 in Central, depending on their condition and if they have been refurbished.