Investing in property under R1m
DURBAN - The demand for entry-level homes has seen a significant increase in the last year, and now more than ever, the momentum has started taking a huge leap as purchasers no longer have to pay Transfer Duty on homes under the R1 million mark.
In a 2019 BetterBond report, it was revealed that between Oct 2018 and September 2019, 44% of their total bonds granted were for between R500,000 and R1 Million. To unpack the future and growth of this market segment, Rainmaker Marketing tackled the topic of investing into an estate under R1 million in their first Property Webinar recently.
"Over the last two years, we have witnessed first-hand how exceptionally well entry-level estates have performed. There is no doubt that strategically positioned properties, geared within the right price-point and supported by a modern, and in many instances, green-inspired lifestyle, are in high demand. With each entry-level development opportunity we work on, like for instance Ballito Groves and Mason; we are seeing how it has proven to be a successful investment for both developers and end-users. We expect to see this market segment lead the property industry, especially through the economic challenges experienced during and post Covid-19,” explains Stefan Botha, Director of Rainmaker Marketing.
With the interest rate at its lowest, as well as bond lending flexibility and the introduction of Financed Linked Individual Subsidy Programme (Flisp) for properties under R1 million, it is pertinent for first-time home buyers to see this as an investment opportunity.
"Typically, 70 percent of your purchasers are first-time home buyers that are coming in to live in these estates. These developments therefore cater to the aspirational part of purchasers. They are a steppingstone and first port of call before they go into their larger residential development. The market has gone to great lengths to teach people that their first property is something of an investment; they are going to have capital appreciation, they can start a family, and once they start growing as a family they can start looking to buy their second property. This allows first-time buyers to take some of the capital gains from their first property," said Graham Kusano, Senior Development Asset Manager (IHS).
Highlighting the investment performance typical of entry level developments, between 2016 and 2019 the average year-on-year price inflation within the affordable market was 11 percent. With this segment comes new and innovative approaches to lifestyle offerings. The inner-city rejuvenation revolution seen through Jewel City for instance, is driven by urbanisation and the live-work-play concept, where modern needs of having everything conveniently close by are catered for.
This property segment has so many opportunities to really get creative and set a new benchmark in modern living. One of the key influential lifestyle elements entry-level estates, like Mason and Ballito Groves, have incorporated is green and sustainable features. “Edge is a green building rating system – it stands for Excellence, Design Efficiency – and developers can opt to voluntarily use it in their projects as it is not a mandatory requirement, albeit a very beneficial one. It was developed by the International Finance Corporation (IFC), and the Green Building Council of South Africa (GBCSA) have partnered with the IFC to be the local independent certifier,” shares Georgina Smit, Head of Sector Development & Market Transformation, Green Building Council SA (GBCSA).
Furthermore, Edge-certified developments feature the likes of smart meters, low-flow faucets and fixtures, solar powered geysers, as well as energy saving light fittings and sensors. These green instalments help residents save at least 20 percent on their utility bills. Additionally, by investing within green-inspired properties, investors have the chance of potentially earning a 4 – 10 percent higher value in this type of property, than any other standard estate offerings.
With the likes of FNB reporting a current home loan approval rate of 91,2 percent in 2019, and OOBA revealing their loan-to-value ratio at their highest at 88.4 percent in October 2019; it is evident that this market is seeing huge benefits and one to consider whether you are a first-time buyer or a seasoned property investor.
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