Pandemic drives property boom in Khayelitsha
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Investors capitalising on the low interest rates set by the Reserve Bank are pushing Cape Town's largest township Khayelitsha into a property boom.
Real Estate agents operating in the township say demand for homes has been surging since the middle of the Covid-19 pandemic with buyers prepared to spend more than a R1 million.
For most property seekers Ilitha Park is the big prize.
"Ilitha Park has become a sought after suburb in Khayelitsha with property prices averaging between R1.2 million and R1.3 million," said Remax estate agent, Lebo Masilo.
In other parts of Khayelitsha including Harare and Makhaza, property prices have also shot up, averaging between R500 000 and R800 000, she said.
Masilo said the pandemic had prompted people to "rethink, reset" their lives, and helped them make the decision to either sell or buy in Khayelitsha.
She said some buyers had either freed up their savings or used their pension payouts to buy the properties with the hope that they would earn extra income.
Masilo said acquiring a new property in Khayelitsha was also driven by the opportunity to build flats to rent out to prospective tenants.
The average plot size in the suburb was around 200 square metres, Masilo added.
FNB Senior Economist Siphamandla Mkhwanazi agreed that the lower interest rates had supported demand across price segments, including the affordable segments.
"Property holds a high sentimental value for lower income households, and some just prefer living in areas that align with their lifestyle and sense of community. Furthermore, property in highly dense areas tend to attract demand from investor buyers, who buy-to-let. Demand for rental is high because of affordability and close proximity to business districts," he said
Pam Golding' Properties' estate agent Gift Mkondweni, concurred.
"There is currently a high demand for properties in Khayelitsha, especially in Ilitha Park, Mandela Park, Harare and Maccassar. Many buyers are purchasing to turn the properties into flats for additional income," Mkondweni said.
She said in Mandela Park/Harare some of the properties were sold for as little as R250 000 and as high as R950 000.
Masilo said the RDP homes fetched between from R180 000 to R250 000.
She said rental yields for a bachelor flat in Ilitha Park was up to R3 500 before the pandemic but had dropped to about R2 500 and R2 000.
"But during the pandemic most tenants relocated from Ilitha Park to places such as Harare where rents were slightly lower. Property owners had no choice but to lower the rentals,“ said Masilo.
The property sellers described the new homeowners as either first-time buyers who wanted the property to pay for itself, retired people with large pensions, and cash buyers who used their savings.
"Sellers are not really concerned about the state of the housing market value in the area when determining prices. They just want a good deal," said Moloi.
Life Assurance company, Old Mutual ownes a property zoned for residential development in Thembokwezi, a suburb close to Ilitha Park.
The company said it was waiting for provision of sufficient bulk sewerage capacity by the City of Cape Town before it could reassess development plans.
Property Economist at the University of Cape Town's Urban Real Estate Research Unit, Prof Francois Viruly explained the trend.
" South African cities continue to see rising levels of urbanisation which is playing a role in underpinning demand. Added to this we are seeing younger individuals moving from home".
He said that micro developers were seeing opportunities and that a number of homes were being densified with the addition of units on the same plot, which would result in a positive impact on value.
However, Viruly said there was a critical need to provide social infrastructure in places that were affordable for the majority of households.
"It is also important that we move away from the 40 sq metre house, 40 kms away from work, spending 40% of income on transport, and spending 40% of the working day travelling. It is also important that we release land in well located areas for affordable housing," he added.