Property Investment Special Focus
13 OCTOBER 2016 WWW.BDLIVE.CO.ZA 9 MARCH 2018 WWW.BUSINESSLIVE.CO.ZA
Retirement estate investment boom PAGE 9
Positive forecast on student digs PAGE 17
Local Reits: still stable assets? PAGE 22
The rise of the ‘rentvestor’ Mauritius: buy early and profit PAGE 26
More first-time buyers are entering the market by investing in property to let in the suburbs, while living elsewhere as tenants
HOMEFRONT BUY TO LET
The rise of the ‘rentvestor’ More first-time buyers are entering the market by investing in property to let in the suburbs, while living elsewhere as tenants WORDS: HELEN GRANGE :: PHOTOS: GLEN CARRIE, NATASHA LASSEN AND SUPPLIED
rban centres throughout SA are seeing the emergence of a new kind of property investor — the “rentvestor”. Rentvestors are people who may not be able to afford to buy in the areas where they live and work, but are so determined to become property owners that they are seeking out less expensive areas with a promising future, and buying homes that they can let to others, says Realnet MD Gerhard Kotze. “In other words, they are becoming landlords themselves while remaining tenants, which is a new take on the buyto-let model,” says Kotze. “One generally finds that the investors own their primary residences.”
A property in Bryanston, Johannesburg
The rentvestor trend, also happening in other parts of the world, is facilitated by technology that gives property buyers much easier access to quality information and statistics, and allows them to communicate and collaborate much more easily. It is also fuelled by an awareness of first-time buyers that property is becoming an increasingly elusive market, but potentially lucrative, once they’ve invested wisely in it.
Gauteng In Johannesburg, Kotze says rentvestors are looking for property in areas such as Lonehill, Rivonia, Morningside, Bryanston and Northcliff. Apartments are available for between
R900,000 and about R1.4m, with rentals from about R9,000 to R13,000 a month, which should cover bond repayments. “Over time the bond gets paid off, the owner’s equity in their property grows along with capital appreciation, so you end up with a valuable asset that can be sold at a profit or retained as an incomeproducing unit,” says Kotze.
HEALTHY APPETITE Amdec Property Development MD Nicholas Stopforth says there is a healthy appetite for residential property in Johannesburg. “One on Whiteley apartments in our Melrose Arch mixed-use precinct sell from just above R2m, as first-time buyers opt to invest in a smart city
where you can live, work and play.” Buyers are looking for convenience, the latest technology, connectivity and security. “Increasingly, mixed-use precincts are offering all of these,” says Stopforth. “Each apartment offers urban living that is ideal for working professionals and corporate long-stay tenants, affording investors excellent rental yields and capital growth.”
BARGAINS Sandton CBD is also attracting rentvestors with access to larger bonds. Bargains have cropped up due to an oversupply of apartment units, which drove down returns last year, says Lew Geffen Sotheby’s International Realty rental specialist Shaun Groves.
“One of our buyers recently purchased an apartment in Sandown for R1.7m and we let it for R17,000 a month. That’s a 12% gross yield” Shaun Groves, rental specialist, Lew Geffen Sotheby’s International Realty
Multi Spectrum Property Developments’ Buh-Rein Estate near Durbanville in Cape Town
HOMEFRONT “The time is now, because the gap between the escalation of income and property prices is everwidening” Werner Scheffer, marketing manager, Multi Spectrum Property
Duplexes in Green Point, Cape Town
DO YOUR HOMEWORK While rentvesting is a good way to get a foot in the door of the property market, Charl van Niekerk, marketing manager of Central Developments Property Group, offers some cautionary advice. “Affordability will be a bigger consideration than location for someone trying to enter the property market, but you need to do your research into the area’s short- to long-term plans for improvements to infrastructure, job opportunities and new business in the area. “The more experienced investor knows that location makes all the difference in the long run, not only in terms of capital growth potential, but also the quality and longevity of tenants,” he says. Pam Golding franchise services national sales and operations manager Greta Daniel says the quality of tenant should be a strong consideration in this market. “Middle-market properties are where rentvestors need to focus, as they tend to attract more stable tenants. The bottom end of the market tends to be more volatile and erratic on payment, and at the top end, larger deposits are necessary,” says Daniel.
“One of our buyers recently purchased an apartment in Sandown for R1.7m and we let it for R17,000 a month. That is a 12% gross yield.” Kotze says the rentvestor trend is noticeable in Tshwane. “We are seeing families rent homes in prestigious estates such as Silver Lakes and Cornwall Hill, and buy houses and townhouses to let in popular central suburbs such as Villieria, Moregloed and Rietfontein, or flats in areas such as Hatfield and Arcadia, or Die Hoewes in Centurion. “These are in high demand because of their proximity to the Gautrain station,” says Kotze.
COST-EFFECTIVE Home prices start at about R2.7m in Silver Lakes golf estate and at about R3.5m in Cornwall Hill, while monthly rentals for quality three- and four-bedroom homes in these estates start at about R20,000, making it far more cost-effective to rent there. Conversely, a threebedroom house in Villieria starts at about R900,000 and can fetch a rental of about R8,500 to R12,000 a month.
RETURNS That said, people are realising they have to start investing somewhere in order to reach financial freedom, and there is no better way than to invest in areas delivering great rental returns and capital growth on their investments. “The time is now, because the gap between the escalation of income and property prices is ever-widening,” Scheffer says. “It will become more and more difficult to enter the property market.”
In the sweep of suburbs from Rondebosch to Sea Point, rentals for a twobedroom apartment start at about R9,000 a month, and at R12,500 for a threebedroom unit. Purchase prices for these apartments start at about R1.2m for two bedrooms, and R1.6m for three bedrooms. A house or apartment along the West Coast, such as in Saldanha or Winelands towns such as Robertson, Tulbagh or Wellington, starts at about R800,000. “In Robertson, there are three-bedroomed cottages available from about R800,000 to R1m, or even less for buyers who are prepared to renovate,” says Kotze. Savvy rentvestors do, of course, keep an eye on older properties on the Atlantic Seaboard close to town that may be selling under the
R2m mark, as these solid ROI properties do crop up. “The best options are sectional title units in lower Sea Point and Green Point, especially apartments in older blocks,” says Debra Levin, Lew Geffen Sotheby’s International sectional title specialist in Sea Point and Green Point. “Although these buildings were remarkably well built, many have not been well maintained and are therefore priced more accessibly. The buildings on Main Road especially have seen fantastic growth in rental yields over the past two or three years,” Levin says.
KwaZulu-Natal Durban is another robust market for rentvestors, as the acquisition costs are low enough to make the yields and gearing highly attractive, says Pam Golding Properties
area principal for Durban Coastal Carol Reynolds. “Umhlanga is a good example. You can secure an apartment in the New Town area for about R1m and get a monthly rental return of between R7,000 and R8,000. If you simply pay a 30% deposit, your property is perfectly geared and the return on cash invested is excellent,” she says.
GOOD BET Trendy hubs closer to town are a good bet. Mandy Testa, area specialist for Lew Geffen Sotheby’s International Realty in Durban North and Umhlanga, recently sold a one-bedroom apartment in Morningside for R550,000 to a rentvestor couple, and rental was set at R5,000. “We sell many apartments in Morningside and Gateway as investments,” says Testa.
Western Cape The typical rentvestor in Cape Town rents an apartment or townhouse close to the city centre to avoid severe traffic congestion. They own a home out of town that they plan to move to in the future, letting it in the meantime. However, there are fewer of this kind of investor in Cape Town than other
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parts of the country because property prices are generally much higher, says Multi Spectrum Property marketing manager Werner Scheffer. “The percentage of firsttime buyers is much lower in Cape Town than the national average because the market is less accessible.”
Pam Golding Properties has listed this three-bedroom townhouse in Umhlanga Rocks for R3.25m A
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Surge in dedicated estates P Developers rush to meet rising demand for retirement lifestyle investments WORDS: GEORGINA GUEDES :: PHOTOS: SUPPLIED
Helderberg Manor, Somerset West
eople are living longer and remaining in better health, which has changed the face of retirement estates and left developers struggling to keep up with demand. The World Health Organisation’s 2015 World Report on Ageing and Health says the proportion of SA’s population aged 60 years and older will double from 7.7% in that year to 15.4% of the country’s total population by 2050. The number of South Africans of 60 years and older is now about 4.2-million. By 2050, this will swell to about 10-million. Tongaat Hulett Developments’ Retire KZN market research initiative puts SA’s population at 56-million in 2017. It projects that the retirement market will increase by up to 5.86-million by 2050. Retirement affordability is highlighted in this research — many pensioners are struggling to maintain their
standard of living, and this occurs alongside low state pension benefits. Retire KZN notes a significant shift of younger buyers in retirement estates, with as many as 60% of purchasers buying as investors. Demand will continue to outstrip supply. “Most retirees today form part of the baby boomers born between 1946 and 1954, putting them between the ages of 63 and 71,” says Jessica Kolver of Engel & Völkers. “Since 2011, baby boomers have entered the retirement phase and will continue to do so for the next 10 years.”
DEBT High levels of debt leave many baby boomers financially unprepared for retirement. “This has significantly changed the way we see retirement and its products and services,” says Kolver. “This group has received improved medical care and leads healthier lifestyles than its predecessors,”
she says. “This leads to a demand for retirement villages and less availability in existing traditional old-age homes.” “We’re seeing an increase in the demand for upmarket retirement housing in SA, especially with the consistent rise in life expectancy in the country over the past 10 years,” says Evergreen Lifestyle CEO Arthur Case.
CONFIDENCE The Amdec Property Group established retirement accommodation provider Evergreen after identifying this growing market, says Case. Leading financial services firm PSG has purchased a 50% stake in Evergreen, showing confidence in filling this retirement housing gap. With villages in Johannesburg and the Western Cape, Evergreen can attract middle-income retirees who would otherwise not have been able to afford this kind of housing. The pricing, based on the life rights model, makes these homes more affordable than comparable freestanding or sectional title properties. Last month Kuwait’s IFA Hotels & Resorts announced that it had concluded a joint venture deal with Evergreen. The partnership ensures that the R3bn retirement offering within Zimbali Lakes Resort on the KwaZulu-Natal North Coast will have the capital to ensure all facilities will be completed before the first resident moves in.
Plettenberg Manor, Garden Route
Evergreen Lifestyle Zimbali Lakes will include sectional title apartments, to be sold on a life rights basis. It is geared around demand for secure retirement living for over-55s and will provide a dedicated on-site healthcare centre, assisted living facilities, frail care and an array of luxury lifestyle amenities. KwaZulu-Natal in
HOMEFRONT particular has seen a surge in retirement developments after a drive to attract this kind of buyer. Tongaat Hulett’s Retire KZN initiative positions the province as a retirement destination. Its research shows higher retiree demand for freehold units, particularly twobedroom units at a price of R2m or less. A flagship development is the Mount Edgecombe Retirement Village on the North Coast, within the established Kindlewood Estate and adjacent to the Mount Edgecombe Country Club Estate.
PHASES By December last year, more than 60% of 110 units in phase one of this estate had sold. It will be developed in three phases comprising 263 units. The care centre and phase one units are intended for completion and occupation towards the end of 2018. “We are seeing that retirement villages are coming into their own, without compromising on quality,” says Mount Edgecombe area principal
for Pam Golding Properties Sally Cameron. “They not only provide all the facilities offered by residential estates but supply the additional service of comprehensive medical care.”
POTENTIAL Cameron says the investment aspect is an appealing drawcard. Buyers are happy to see the benefits of capital growth in their property acquisition, as well as the potential to let the property before their own occupation. If the property is let, tenants have to be more than 55 years old. High quality one-, two- and three-bedroom living units and a limited number of freestanding homes are selling from R2.5m to R4.5m. Engel & Völkers Southern Africa CEO Craig Hutchison says that today’s developments encompass pleasing design, community living and top-flight facilities, as well as proving to be a growing capital investment. Engel & Völkers’s De Land Estate in Potchefstroom is a good example. It is a
30ha security development on the northern side of Potchefstroom — 90 minutes from Johannesburg — and part of the estate is a 4ha village for the 55-plus age group. Retirement developments around the country report rapid rates of sales. Palm Vue, the sixth and final block of the Oasis Luxury Retirement Resort at Century City has already sold 35 of 42 units, six months before completion. The 11-storey building, comprising one-, two- and three-bedroom apartments, is being developed in a joint venture by the Rabie Property Group and a Harries Projects consortium at a cost of R270m. Apartments, which range in size from 94m 2 to 247m 2, including terraces, are priced from R3.4m to just more than R10m, VAT inclusive. No transfer duty is payable.
SALES Similarly, at De Plattekloof Lifestyle Estate, 20 minutes from the centre of Cape Town, sales hit the R114m mark in September last
Palm Vue at the Oasis Luxury Retirement Resort in Century City, Cape Town year, 120 days after launch, with R56m secured in the first 30 days. To date, the estate has achieved sales of about R168.3m. De Plattekloof Lifestyle Estate is an Arun Lifestyle project, backed by Arun Holdings and Old Mutual. “We are pleased at the interest and uptake,” says Johan Loubscher of Arun Lifestyle. Located on the edge of the Northern Suburbs, the estate is attracting buyers from both greater Cape Town and the Northern Suburbs, says Loubscher.
Buh-Rein near Durbanville, Cape Town
Mount Edgecombe, KwaZulu-Natal North Coast
The successful Helderberg Manor Retirement Village in Somerset West has launched a block of apartments to satisfy high demand. To be completed in mid-2019, the block will offer eight units, consisting
Waterfall Hills Mature Lifestyle Estate, Midrand
"Since 2011, baby boomers have entered the retirement phase and will continue to do so for the next 10 years" Jessica Kolver, Engel & Völkers
Featherwood, Pretoria East of two-bedroom, onebathroom apartments priced at about R1.6m. “The fact that most facilities have been completed at Helderberg Manor makes these apartments very attractive to prospective buyers,” says Devmark founder and CEO Hein Ehlers. La Récolte Retirement Village in Stellenberg, Durbanville, is another development that has had good sales. Phase two will include Block B of 42 units. Launched in September last year, more than 60% has sold. “The development is close to Tyger Valley Shopping Centre, Willowbridge, the Durbanville Winelands, hospitals and clinics. It also offers easy access to the N1 highway,” says Engel & Völkers’ Kolver.
GARDEN ROUTE The Plettenberg Manor, recently listed as one of the country’s top 10 retirement estates, will cater to rising demand in the Garden Route. When completed, it will offer 111 luxury homes and exclusive cottages, as well as 54 assisted living suites and healthcare facilities. Prices range from about R1.82m to R3.82m, including VAT with no transfer duty. “Plett is growing, both nationally and internationally. We’ve seen an influx of buyers, especially from Gauteng, who hope to retire in the Southern Cape. There is already a shortage of retirement estates in the area and by all indications, demand will only increase,” says Devmark’s Ehlers. Evergreen Val de Vie in Paarl has sold more than half of phase one. Residents will start moving in towards
the end of 2018. Val de Vie benefits from natural surroundings, world-class security and access to all amenities of the broader estate, which was rated as the number one residential estate in 2015, 2016 and 2017 by New World Wealth.
SECURITY VILLAGE Award-winning Buh-Rein Estate in the Northern Suburbs of Cape Town will now also cater for the elderly with the introduction of the Buh-Rein Retirement Village in 2018. “This security village will comprise close to 500 sectional title properties, consisting of one- and two-bedroom luxury apartments with covered parking bays and covered walkways for the convenience of all residents,” says Multi Spectrum Property marketing manager Werner Scheffer. “The Care Centre with frail care services and dementia units are further complemented with a
state-of-the-art memory bureau for expert advice.” The bureau’s staff will offer counselling to family members on conditions that affect the memory, such as Alzheimer’s Disease. In Gauteng, properties at Waterfall Hills Mature Lifestyle Estate and Waterfall Valley Mature Lifestyle Estate have proved to be solid retirement investments. Now sold out, the 442 freestanding homes and 60 apartments have increased in value since 2010 by an average of 200%. A 270m² house bought for R2.6m in 2010 is now worth more than R5m. Buying to rent has proven successful. “Owners are receiving high rental returns, easily covering their expenses, all the while benefiting from exceptional capital appreciation,” says Century Property Developments CEO Mark Corbett. While countryside retirement estates with
Evergreen Lifestyle Zimbali Lakes, KwaZulu-Natal North Coast
“Owners are receiving high rental returns, easily covering their expenses, all the while benefiting from exceptional capital appreciation” Mark Corbett, CEO, Century Property Developments
self-contained amenities are popular among the target market, city-based estates or retirement blocks are also gaining attention. Featherwood Retirement Estate, marketed by Seeff Pretoria East and located close to the Woodlands Mall and Pretoria East Hospital, offers houses and units for active residents, and assisted living facilities. There is also round-theclock frail care. Prices range from R1.135m for a two-bedroomed unit to R1.79m for a unit with three bedrooms and two bathrooms. These units are sold on life rights and sectional title. . While good health and longevity are desirable, this leads to competition for space in leading retirement estates. Property developers are taking notice of this demand and are building furiously in an attempt to keep up. The next generation of retirees had better hope that they keep building quickly enough.
TOP 10 RETIREMENT ESTATES IN SA Constantia Place Evergreen Bergvliet Evergreen Noordhoek EvergreenVal de Vie Mount Edgecombe Retirement Village The Plettenberg Manor San Sereno The Somerset The Tokai Estate . Waterfall Hills Mature Lifestyle Estate Source: New World Wealth, September 2017
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Other benefits include: • A medical alert system in each unit linked to the state-of-the-art frail care centre* • Various medical facilities • Natural wetland and nature conservancy • Recreation facilities, including a coffee shop, swimming pool and recreation hall • Hair salon • Kitchen serving light, nutritious meals
la vie nouvelle Retirement and Wellness Estate Broadacres
*Under construction with anticipated completion in March 2018.
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Lifestyle and Retirement
Perfectly situated for a peaceful and tranquil existence. Nestled on undulating farm land 2km outside Howick, on the Karkloof Road, KwaZulu-Natal Midlands. Suitable for both retirees and families who long for a peaceful and tranquil existence. Within easy access of schools, shopping centres and regional airports. State-of-the-art security.
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HOMEFRONT STUDENT ACCOMMODATION
Making an educated investment SA is making headway in tackling the shortage of student lodging. How are student towns and urban hubs meeting demand? WORDS: MIRIAM MANNAK :: PHOTOS: SUPPLIED
ver the past 20 years SA’s student population has almost doubled, from 490,000 students in 1994 to more than a million in 2015, government data show. By 2030, their numbers are expected surpass the 1.5-million mark as plans to establish more universities come to fruition. Property developers are certain this will increase demand for student accommodation. “The shortage has increased and will continue to increase as the total number of students entering universities grows, especially now that poorer students are entitled to free tertiary education,” says Stag African CEO John Schooling. “That said, Cape Town, Johannesburg, Grahamstown, Bloemfontein and Stellenbosch appear to be doing a good job addressing the shortage of student
Hatfield Square, Pretoria
accommodation, with the private sector building thousands of new student units every year.” Jessica Hofmeyr, Century Property Developments head of operations, sales and marketing, agrees. “Our research has found that student accommodation is in demand, especially in locations where students can walk to the university,” she says.
POPULAR The Yard in Auckland Park, next to the University of Johannesburg, is one such popular development. The complex opened its doors in 2004 comprising one-, two- and three-bedroom apartments for the buyers’ market. Prices ranged from R385,000 for a 60m2 apartment and R578,000 for an 82m2 basic to R1.7m for a luxury apartment. “They sold in record time,” says Hofmeyr. In Braamfontein the demand for student residences is booming
too, due to its proximity to the University of the Witwatersrand and several technikons and colleges. Byron Cornish, a Seeff licensee in the Johannesburg CBD, says 95% of inquiries are for student accommodation. Many students prefer sectional title living to oncampus accommodation. “We have just taken over a beautiful new femaleonly residence known as the Ntombi Res, which has proven popular. It includes all utilities and Wi-Fi for a monthly rental of R3,595 for a 10-month lease.” There is surging demand for student accommodation in smaller university cities. In Port Elizabeth, CampusKey recently opened its latest student housing complex. The development on Scarborough Street, Summerstrand, has a capacity for 300 occupants and features two-bedroom apartments with en-suite bathrooms, a fully
Campus Key, Stellenbosch
The rooftop recreation area at CampusKey’s Scarborough development in Port Elizabeth equipped kitchen, all major furniture, a study area, built-in wardrobes, a wall-mounted panel heater and a 40” LED TV. This is in line with what students expect from their living arrangements. More are seeking allinclusive setups in terms of water, electricity, laundry, Wi-Fi, cleaning services, parking, furniture and a fully equipped kitchen, says CampusKey MD Leon Howell. “It is important for students’ success that they are provided with a complete lifestyle offering and not only a bed,” says Howell. In Pretoria, the 2,200bed Hatfield Square development has student accommodation comprising five modular unit types — single and double sharing, single en suite with kitchenette, double sharing en suite and apartmentstyle units with four bedrooms and kitchenettes.
OPTIONS This incorporates a range of rental options, with common study rooms and lounge/kitchen areas on each floor. It is due for completion in August 2018. The development, owned by Redefine and Respublica, and to be managed by Respublica Student Living, will incorporate 3,500m2 of retail space, including a mix of restaurants and line shops, a computer centre, large study centres, recreation rooms, laundry facilities, a swimming pool and landscaped gardens. Amenities include a rooftop gym, a computer centre, large study centres, recreation rooms, laundry facilities, a swimming pool and landscaped gardens
“Our research has found that student accommodation is in demand, especially in locations where students can walk to the university” Jessica Hofmeyr, Century Property Developments
Studentathome, Cape Town and a braai area. A total of 85 common facilities are spread over the four buildings and seven courtyards that comprise the development. Studentathome, a Cape Town student accommodation hub, operates a mixed-use student complex on Adderley Street featuring micro apartments and a host of services and facilities. “There is not only a need for student accommodation but a need for good, welldesigned, well-managed student accommodation,” says MD Emily Whitefield.
AFFORDABLE She says her organisation tries to give the students an experience and an affordable home rather than simply filling beds. “Costs include all student needs such as Wi-Fi and study areas.” Besides Cape Town, Johannesburg, Stellenbosch
and other more affluent student towns, less well-off university cities too are hit by student accommodation shortages. Schooling says it is not uncommon to have six students living in a room designed for two.
SERVICES Stag African says it helps ease the problem by building adequate, functional student residences that help youngsters thrive, socially and academically. “We have completed a 248-bed residence at Walter Sisulu University in Mthatha as well as a 610bed complex at Fort Hare University in Alice, also in the Eastern Cape,” says Schooling. “Here, we have a further 1,436 beds to build.” Century Property Developments is active in Fort Hare. “In 2012 we won a tender to refurbish an existing building comprising 3,999 beds. This agreement also included
managing the units for nine years,” says Hofmeyr. The project led to the construction of its first student apartment block in East London. “The development comprises 290 beds, all of which we still own and manage.” Taking the above into consideration, is buying homes or apartments to let to students a good investment opportunity? It can be, says Schooling, but only if a large enough deposit is paid. Student rents will typically be lower. “I believe it is a good investment if you are able to contribute up to 50% of the funding required. Then, the typical return is in the vicinity of 5% to 7% a year,” he says.
MANAGEMENT Student accommodation as an investment differs from normal residential property, particularly from a maintenance
and management angle, says Schooling. “Student accommodation requires greater management and input resources.” Hofmeyr agrees. In essence, investors will compete with developer rental prices — much lower than the rental prices of conventional residential units.
RENTS Student developers such as CampusKey charge annual rents of about R60,000 a year, all-in, while StudentAtHome offers units from R5,500 to R7,500 a month, also all-in. “If someone wants to invest in student accommodation, I would encourage them to purchase a more upmarket cluster unit for about R2.2m and let it for R18,000 a month,” Hofmeyr says. “The demand in this segment is much higher — there are fewer developers
and investors that operate in this segment. They all seem to have focused on apartments rather than a three-bedroom home with a garage.” Howell says buying property to let to students is not just an investment decision in terms of returns. It must be understood that the student accommodation sector is management-intensive. “Students have become demanding in terms of what services and facilities are on offer,” says Howell. They are no longer happy with mediocre service delivery from landlords and accommodation providers. Says Hofmeyr: “Offering units with communal areas such as a kitchen, dining room, pool and garden and services such as free Wi-Fi, tight security and the regular cleaning of units should secure your place in the market.”
The student common at CampusKey’s Scarborough development in Port Elizabeth
RENTAL RETURNS Gauteng: Braamfontein offers great returns for investors. Johannesburg CBD Seeff Properties licensee Byron Cornish says bachelor rental units are priced from R6,000 a month, one-bedroom apartments from R7,500 a month and two-bedroom apartments from R8,500. “The high demand for tenants and high rentals create a huge opportunity for investors. We are still able to provide opportunities yielding returns above 10%.” Tyson Properties Gauteng director Jonathan Davies says that not all student developments in Gauteng are new complexes. “Some developers are revamping older buildings. Maboneng in the inner city is a good example of this.”
Winelands: Stellenbosch offers good investment
opportunities. There is always a demand for units close to campus, ranging from R875,000 in Prinspark and from R1.09m to upwards of R5m for larger apartments in prime locations. “In areas such as Stellenbosch, student accommodation is no longer seasonal — demand is year-round — with parents making up an increasing percentage of buyers,” says Pam Golding Properties research analyst Sandra Gordon, who notes that the median sectional title property price in Stellenbosch central is R1.5m. “On-campus premium residential rent averages R8,000 a room. For off campus you would be looking at R5,000 a room.”
Cape Town: The demand for student
accommodation in Rondebosch, Claremont and Kenilworth is perennial, says James Lewis, MD Seeff Properties Southern Suburbs, Hout Bay and Llandudno. “Some parents buy an apartment for their children, but keep it after their child’s studies to let to other students.”
KwaZulu-Natal: The areas surrounding the Durban University of Technology and the University of KwaZulu-Natal are the most in demand among students, and therefore are worth looking at from a student accommodation investment point of view, says Kim Woods of Tyson Properties in Morningside. “Manor Gardens, certain parts of Glenwood and lower Musgrave and Berea are popular.”
Seeff Properties markets Bridgeview bachelor units in Braamfontein from R6,000 to R7,250 a month
“Some parents buy an apartment for their children, but keep it after their child’s studies to let to other students” James Lewis, MD, Seeff Properties Southern Suburbs, Hout Bay and Llandudno
Hatfield Square, Pretoria
Financial perks of student life Buying student accommodation can have extra tax benefits
WORDS: SARAH HUDLESTON :: PHOTO: ISTOCK
or many people, investment in the property market is one of the most secure sectors to put money into — and student accommodation is one area that is primed for a boom. With the announcement last year by former President Jacob Zuma that all first-year students from households earning an income of less than R350,000 a year will be eligible for free university education, the demand for formal student accommodation will grow exponentially. SA is attracting higher numbers of students from other countries in subSaharan Africa. The latest research by Jones Lang LaSalle (JLL) has found that the number of young
adults across the region aged 18-25 will increase to almost 100-million by 2020. The demand for new, purpose-built student accommodation is set to top 500,000 beds in the next five years. The JLL report says that with continuing public sector budget constraints (and not only in SA), private investors may well find that “student housing projects are among the most attractive investments they can make in Africa”.
ATTRACTIVE Making it even more attractive for investors interested in this sector is the Section 12J tax legislation of 2009, a tax initiative introduced by South African Revenue Service to boost the
“Provided the shares are held for at least five years, the tax authorities will not recoup the initial tax benefit” Dino Zucollo, fund manager, Westbrooke Alternative Asset Management
economy by encouraging investment into a range of private companies that meet defined criteria. Westbrooke Alternative Asset Management is SA’s largest Section 12J company, and fund manager Jonti Osher says it looks after almost half the capital invested in S12J funds in the country. The company recently began offering tax-deductible investments in the student accommodation and hospitality asset sectors. “The S12J investment tax incentive gives individuals, companies and trusts the ability to write off 100% of the investment against their taxable income in the year in which they invest,” says Osher.
TAX RELIEF Investors can benefit from
up to 45% immediate tax relief, reducing the cost of the investment while providing downside protection and enhancing overall returns, he says. Fellow Westbrooke fund manager Dino Zucollo says the only caveat is that the investment must be held for five years. “The investment should be made at the end of the tax year, on February 28. But even if would-be investors have missed the deadline, they have ample time to consider this type of investment for the next year. “Provided the shares are held for at least five years, the tax authorities will not recoup the initial tax benefit,” says Zucollo. “After five years the full proceeds from the sale of the shares will be subject to capital gains tax.”
Prospects positive for SA Reits Listed property has delivered great returns in recent years. Is this still a stable asset class, or have Reits had their time?
WORDS: SARAH HUDLESTON :: PHOTO: ISTOCK
he South African listed property market has been profitable for investors in the past couple of years. In 2017 the FTSE/JSE South African Listed Property index achieved total returns of 17.2%, building on its performance in 2016 of 10.2%, to deliver double-digit growth for investors for the second year running. Research from Bridge Fund Managers shows that within the overall listed property universe South African real estate investment trusts (Reits) returned 13.5% in 2017. However, since the beginning of 2018, the South African listed property
“I view Reits as being an extremely attractive asset class, even more so now, given the less demanding valuations after the recent declines in share prices” Craig Smith, stockbroker, Anchor Securities Stockbrokers
sector has performed negatively, undergoing a 20% drop in value due to a number of external reasons and perhaps investor confidence. But experts say that they are bullish about the sector.
RETURNS Last year, listed property outshone cash, which delivered returns of 7.52%, and South African bonds at 10.19%. Listed property came in hot on the heels of South African equities at 20.9%. Balwin Property Developers, for example, provided a return on invested
capital of 26.75%. Local Reits also delivered their second consecutive year of double-digit performance, having returned 14.7% in 2016 (see SAreit.com). In 2017, the internationalisation of SA’s listed Reits emerged as the sector’s dominant trend. Its international
exposure increased significantly as the sector continued to pursue growth in other investment markets around the world.
POSITIVE Stanlib Property Income Fund portfolio manager Keillen Ndlovu remains positive about the sector’s
prospects in the medium to long term. He expects a total return (base case) scenario of 11.04% capital and income over the next 12 months. “We believe the sector offers good value at these levels with a one-year forward yield of about 8.2%, which is higher than
South African government 10-year bond yields at 8.1%. We forecast income to grow by 7% to 8% over the next year,” says Ndlovu. “And despite the current market volatility we continue to see opportunities and will manage the fund prudently to achieve capital and income growth over time.”
PROFIT TAKING Ndlovu says the poor performance of South African Reits in the past few weeks is due to “profit taking in equity markets as well as market adjustments in the US”. The recent strength of the rand affected the sector, he says, because almost half its constituents are exposed to offshore property markets. Stockbroker Craig Smith of Anchor Securities Stockbrokers is also upbeat about Reits. “I view Reits as being an extremely attractive asset class, even more so now given the less demanding valuations after the recent
“Despite a very tough operating environment locally throughout 2017, the South African Reit sector continued its solid track record of strong positive performance for investors” Izak Petersen, chairman, South African Reit Association
declines in share prices. “I think it is important to emphasise that Reits, unlike equities, have a much more predictable and stable earnings profile due to the contractual nature of leases and lease escalations — unlike other businesses where their earnings are far more cyclical,” he says.
SHARE PRICE Total returns for Reits are a combination of that attributed to income return and that attributed to capital growth — that is, share price movement, says Smith. “Reits are able to influence the income return component through active asset management of properties and the balance sheet. The capital growth element is impacted by market conditions (bond yields, cap rates are typically a big driver) and sentiment. “The movements in share prices have been driven by sentiment in the short
term as the underlying operations within Reits that have been most affected are still strong operationally. It is important to reiterate that the market determines the share price and the ratings of companies,” says Smith. An important question to ask is whether investors would prefer Reits to become more focused (by sector and/or geography), he says. Furthermore, it should be asked whether investors would prefer 100% offshore real estate exposure as opposed to access via a vehicle that includes South African exposure.
PERFORMANCE Commenting on the sector’s overall robust performance, South African Reit Association chairman Izak Petersen says: “Despite a very tough operating environment locally throughout 2017, the South African Reit sector
continued its solid track record of strong positive performance for investors.” In 2017, the internationalisation of SA’s listed Reits emerged as the sector’s dominant trend. Its international exposure increased significantly as the sector continued to pursue growth in other investment markets around the world.
TREND This trend seems likely to continue in 2018 and as long as local market conditions remain difficult. The South African Reit sector’s offshore expansion began more than a decade ago with early investments in the UK, Western Europe and Australia. It has gained increasing momentum in the past two years. Now the sector has exposure in more than 25 countries, mostly in Eastern and Western Europe. About 40% of the listed property sector’s assets are now offshore.
Mauritius shapes up
Demand for residential property surges on this Indian Ocean island WORDS: DEBBIE HATHWAY :: PHOTOS: SUPPLIED
La Balise Marina, Tamarin
Heritage Villas, Valriche
he World Bank’s ranking of Mauritius as the top African country for doing business is the latest accolade boosting activity in the island’s commercial and residential property market. Mauritius lies 25th out of 190 countries, ahead of SA in 82nd spot. Construction and real estate is the secondfastest growing sector on the island, according to the Mauritius Board of Investment (BOI), with a gross domestic product contribution of 10.4% — just 1.6% behind the financial services sector. The trend is set to continue now that foreigners may buy apartments in condominium developments of at least two levels above ground, with BOI approval. The price? Not less than six million Mauritian rupees (about R2.1m), which does not offer the buyer permanent residency. This option is in addition to the investment opportunities within an already approved Integrated Resort Scheme (IRS) or Real Estate Scheme (RES), both of which have now been replaced by the Property Development
“Buy early, and you’ll see capital growth” Richard Haller, director, Pam Golding Properties Mauritius
Scheme (PDS). This has relieved developers of the obligation to sell at least 25% of residential units to Mauritian citizens or members of the Mauritian diaspora. A minimum investment of $500,000 (about R5.9m) in a PDS allows investors permanent residency. “Mauritius is getting busier. People are relocating and setting up businesses,” says Pam Golding Properties Mauritius director Richard Haller, who moved there
HOMEFRONT with his family last year. “What drives this is essentially the ease of doing business from Mauritius. “The government offers several incentives, including a harmonised tax rate of 15%, tax-free dividends and no capital gains tax,” he says. “And the island is just a four-hour flight from Johannesburg.” Pam Golding Commercial is launching in Mauritius this month to help those wishing to establish a business on the island. “There is so much opportunity here it makes sense to offer a commercial solution,” says Haller. The major areas of residential development remain Grand Baie in the north and Black River or Tamarin in the west, which is home to Tamarina Golf and Beach Estate, La Balise Marina and other high-end developments.
FREEHOLD TITLE Developments with freehold title (approved as PDS projects) are sought after by foreigners because 98% of Mauritius beachfront property belongs to the government and may be leased only to Mauritian citizens (or hotel companies) on 60-year leases. Le Parc de Mont Choisy Golf and Beach Resort in vibey Grand Baie is an IRS with sales managed through Pam Golding International. Phase one and two are all but sold out, with phase three launching later this year. “Buy early, and you’ll see capital growth,” says Haller. Premium 500m 2 golf villas that first sold for about R20.3m are now reselling
Pointe d’Esny Le Village, Pointe d’Esny at about R30.5m, while a 346m 2 Parkland villa, originally priced at about R12.9m, sold last year for about R18.9m. In neighbouring Pereybere, 2Futures’ Ki Resort Villas offers 19 units averaging 221m 2 , providing open-plan living in the island style, garden views and a private swimming pool. Prices are from about R7.9m. Ki Resort Apartments, now launching, comprises 93 units averaging 136m 2 that are ideal for entrylevel buyers who want a lock-up-and-go. Priced from about R3.15m to about R9.3m, they offer a solution for executives who may be on the island for up to a month and prefer their own space to that of a hotel or a rented apartment. Clients buying into these PDS developments will gain access to the new
“The major areas of development remain Grand Baie in the north and Black River or Tamarin in the west”
2Futures Beach Club in Pereybere. Nearby, the 2Futures’ Serenity Villas development caters for buyers who want land. There are only 23 villas, ranging from 600m 2 to 1,400m 2 , and priced from about R21m. Designers Stefan Antoni and Eric Chavoix have taken inspiration from Pereybere, creating a luxurious segmented open-plan look with “lots of windows, big overhangs suited for Mauritius and lime-washed volcanic stone”, says Haller. Seeff Mauritius is marketing Opalines in Pereybere and Le Clos du Littoral (phase two) just outside Grand Baie, among others. Opalines offers apartments and penthouses from about R6m. Groundfloor units look on to landscaped gardens while the penthouses
boast wraparound terraces and sea views. Le Clos du Littoral comprises luxury plantation-styled residences including an office/study, private pool and entertainment lapa from about R8.7m. Residents have access to the nearby Trou aux Biches Beach Club.
GO WEST Look to the west for a more suburban lifestyle with direct beach access. Accessible to foreigners, La Balise Marina will be the only residential marina in Mauritius and offers owners the opportunity to live by the sea. The development is located minutes from the Black River Gorges, a big attraction for adventurers, runners, mountain bikers and walkers. The Black River lagoon is La Balise Marina’s garden, and Le
PROPERTY INVESTMENT OVERVIEW The Integrated Resort Scheme (IRS) was the first set up by the Mauritian government in 2001, in collaboration with the Board of Investment (BOI), for the development of land exceeding 10ha. In 2007 the Real Estate Scheme (RES) was introduced to enable landowners to develop property between 0.422ha and 10ha. The Property Development Scheme (PDS) now replaces both, lifting restrictions on the maximum land area to be developed and relieving developers of the obligation to sell at least 25% of residential units to Mauritian citizens or members of the Mauritian diaspora. The BOI says that any noncitizen may acquire a residential unit developed under the IRS, RES and PDS, a residential unit developed in a smart city, and an apartment in a building comprising at least two floors above the ground floor. An investment of $500,000 secures permanent residency for the purchaser and their immediate family. “In our experience, and taking into consideration that investors are still permitted to purchase property within an IRS and RES, the new PDS legislation hasn’t made a notable difference as yet,” says James Bowling, CEO of residency and citizenship for investment facilitator Monarch & Co International.
Ki Resort Villas in Pereybere
“A number of developments offer RES and PDS qualifying options for investors within the same development but in different phases.”
HOMEFRONT Morne lagoon is less than 10 minutes’ drive away. Both are renowned for biggame fishing, kitesurfing, water-skiing and sailing. La Balise Marina, owned by the ENL group, will on completion be an IRS comprised of 143 freehold waterfront apartments, duplexes and villas with permanent moorings. The units are priced from about R8.06m. Prices are fixed in dollars and converted to the prevailing exchange rate.
RESORT STYLE Investors less concerned with permanent residency may consider Asmara Beachfront Residences, a resort-style development with uninterrupted views of the Indian Ocean and La Tourelle mountain range. Also designed by Chavoix, only 28 apartments and seven penthouses are available to foreigners. Each purchase
Le Parc de Mont Choisy Golf and Beach Resort, Grande Baie includes a renewable sixmonth multi-entry visa, valid for five years. Prices range from about R8.4m for an apartment to about R12.25m for a penthouse. Property and rental management is by Pam Golding Luxury Rentals (Mauritius). “Residential real estate is a decent-yielding investment in Mauritius,” says Haller. “Asmara will work well as a rental pool product as there is little stock on the west coast in terms of beachfront resort-style villas, duplexes and apartments.”
Opalines, marketed by Seeff Properties
In the southwest, Heritage Villas Valriche lies at the heart of the Heritage Bel Ombre estate. A former sugar estate, it is also the site for two five-star hotels and a beach club close to the water’s edge, a spa, the fine-dining
restaurant Heritage Le Château, a championshiplevel golf course and the Heritage Nature Reserve. Built by the ENL group, there are five standard designs that can be applied in different configurations to the 288 plantation-style villas in the development. They range from 250m² to 900m², with landscaped gardens from 600m 2 to more than 2,500m 2, generous verandas and an infinity pool. This exclusive collection of villas, priced from about R9.7m, is ideally suited to owners who desire larger, bespoke homes in an exclusive private setting. The prices are fixed in dollars and converted to the prevailing exchange rate.
GREEN CORRIDOR Launched off plan last month, Pointe d’Esny Le Village is the first integrated seaside village project in Mauritius under the PDS. “In the island’s green corridor on the southeast coast, it incorporates close to 400 residential units, plus commercial, retail, hospitality and educational components,” says Diane Watkins of Barnes International Realty, the company marketing the development. Aside from worldclass leisure and sports amenities, Pointe d’Esny Le Village accommodation options range from apartments in the R5.4m price range, duplexes starting from R7.2m and luxury villas from R15.14m. pamgolding.co.za/ international-property/ mauritius seeff.mu sir.mu barnes-international.com
La Balise Marina, Tamarin
• • •
HOMEFRONT PROPERTY NEWS
Waterfall villas launched
entury Property Developments has launched The Villas, Waterfall — the final residential phase of the Waterfall Estates development, consisting of 182 houses. All homes will be available as rental units, with maintenance included. Available in a variety of designs, typical units range from 360m² to 401m² and will have four en-suite bedrooms. Each home
has staff accommodation, a swimming pool and private garden. The Villas, Waterfall, is on the apex of Waterfall Estates. The buildings are positioned to maximise energy efficiencies and capitalise on views. Other “green design” specifications include double glazed windows and low E-glass. Fittings and features include slow-combustion fireplaces and energyefficient gas hobs.
Raised ceilings and large windows allow for maximum airflow and crossventilation. Tenants will have full use of Waterfall Estates’ facilities, such as the clubhouse with a double-storey gym and restaurant, play parks and numerous walking trails. The first units were available for occupation from March 1. The official launch event on March 15 is open to the public. Viewings of furnished show units are possible.
Durban on the brink of big things
N Rosebank landmark nears completion
he Rosebank Link, a 15-storey steel-and-glass office development in Rosebank’s Oxford Road in Johannesburg, is expected to be complete in October 2018. The Rosebank Link, by Redefine Properties, is adjacent to the Gautrain station, The Zone and Rosebank Mall. The building comprises
a total rentable area of 18,744m2 of offices and 1,553 m2 of ground-floor retail. Designed by Paragon, the building will have two basement parking levels, a ground floor public/retail level, five parkade levels and nine storeys of offices from the podium level. The east and west façades consist of a composite aluminium-clad shell with
articulated strip windows to allow light and views to filter into each office module. The north and south façades will offer views over Rosebank. The heart of the building is a multistorey enclosed north-facing atrium. Paragon director Warren Wesson says the building is designed operate in an environmentally sustainable manner.
ow is the time for great investment opportunities in Durban in spite of a challenging economy, says commercial head for Tongaat Hulett Developments Chris du Toit. “With recent acquisitions by national players, we have seen the start of a new season that will continue,” he says. The company plans to attract big property players to the east coast. Du Toit remains upbeat about prospects, notwithstanding the difficulties SA is facing. “We have been through one of the toughest economic years this country has faced in a long time. With GDP growth sitting where it is, a difficult operating environment exists for all businesses.” How does Tongaat Hulett Developments plan to attract national and international property investors? “The sheer scale and nature of upcoming projects lend
themselves to international and national operators in the market,” says Du Toit. Tongaat Hulett will adopt a phased approach that is “good for big developers who look for serious scale”. Says Du Toit: “What we want to see over the next 24-36 months — when the economic climate stabilises and foreign investment returns — is a pick-up in the pace of development and investment. I think that things will improve. The rest of the world is growing at 3% to 4%, so we should be up there as well.” What is the company’s strategy? “In the past, we have embarked on high-end residential, commercial or industrial developments. With a longer-term portfolio approach, the focus will now be more on mixeduse developments with a number of large projects coming up,” says Du Toit. Tongaat Hulett Developments MD Michael
Building begins on R800m Old Mint Park
onstruction has begun on Old Mint Park, a prime industrial development between Midrand and Centurion neighbouring the landmark South African Mint and fronting the N1 highway. The development is directly opposite the future Samrand Gautrain station. The R800m development is a joint venture between property developer Atterbury and Old Mutual Properties that will realise the new state-of-the art
65,000m 2 industrial park. The first building under construction is a business unit development offering premises ranging from 500m 2 to 2,500m 2 in a single 10,000m 2 building. Built concurrently is a second unit, comprising 4,500m 2 of warehouse and office space. Atterbury development manager Derrick Pautz says the business units are expected to be available for occupation by the end of 2018. “Old Mint Park has been well received by the
market. Fortuna Food has already signed the first lease, a 2,000m 2 unit. They will begin trading from their new facility from October 2018,” says Pautz. A big drawcard is Old Mint Park’s location. Pautz says it has excellent frontage on the busiest stretch of highway in southern Africa and is conveniently situated between the N1Brakfontein interchange, Old Johannesburg and Pretoria Main roads, and the Samrand on- and off-ramps.
Deighton says the spotlight will be on development of Durban as an inclusive city. “It is less of a reactive approach and one that is more geared towards cities or spaces that are integrated, inclusionary and compact, which ultimately results in a more liveable city.” What developments are planned for the Durban area and when they will be rolled out? Du Toit says existing projects such as Cornubia — a landmark investment because of its location, access and infrastructure — and Sibaya Coastal Precinct are good foundations. Investors can expect further advancement in the areas west and north of Durban in the coastal and inland regions, as well as the airport region. “We are working on one or two large investment transactions which will unlock the development rollout in both these areas going into 2019,” says Du Toit.
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