The current economic outlook for South Africa is putting the luxury housing market under pressure. On the other hand, properties priced below R1.5 million account for almost 80% of all real estate transactions recorded at the National Deeds Office.
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, these kinds of properties, therefore, present interesting opportunities for investors. The Soweto market, for example, is reported to have averaged annual house price growth of around 30% within the last year.
This is according to Mahau Motaung, Broker/Owner of RE/MAX Ebenezer in Soweto, who explains that the low-income housing market in Soweto has become more like the average middle-income areas as property prices continue to rise along with the availability of cash buyers and property investors. “Soon, there will be no more land left in Soweto. We will then see the introduction of more duplexes and similar properties, such as those being built in Extension 11 Protea Glen. The way I see it, the Soweto property market can only grow and will soon become the Sandton of the South,” he elaborates.
Demand has become so high in certain areas that a few are willing to pay more than the asking price, especially if the property is next to amenities. “Soweto has a few popular shopping centres, including Maponya Mall, Jabulani Mall, Meadow Point and Protea Point, to mention a few. These malls have created high demand, pushing property prices up in the surrounding areas,” says Motaung.
The demand for rentals in Soweto also continues to grow as the youth enter the job market and desire to assert their freedom and enjoy a taste of independence. Motaung explains that many fail to meet the lending criteria to qualify for a home loan, but they view renting as an opportunity to learn the discipline of keeping up with monthly repayments, as they will on a bond in the future.
“Owing to the current economic climate, there is a high demand for rentals. Soweto is home to one of the University of Johannesburg’s campuses. This creates demand for student accommodation in the area. Chris Hani hospital also attracts those from neighbouring countries who, for health purposes, come to the area and require a property to rent while they receive treatment,” says Motaung.
However, there are risks for those who choose to purchase in this area. As a safeguard, Motaung suggests that all properties must have some security features, such as an alarm and security cameras.
“There are also some sellers who owe large sums in arear payments to Eskom. As a result, the prices in some areas are high because the seller has made provision to pay Eskom after the sale goes through. Sometimes, the asking price then becomes higher than the actual market value, but due to the ever-increasing demand in this area, buyers are always willing to pay those prices,” he explains.
While it remains the responsibility of the seller to settle water and electricity accounts when the property is sold, Motaung advises that buyers make a point to check that the account has been settled at the time of transfer because once transfer takes place and the seller is no longer reachable, it might become the new owner’s problem to settle the arear accounts should Eskom decide to cut off their power.
Buyers are also advised to go into the house to view it. “Never view the house from the street and don’t accept excuses that there is never anyone at home to let you in. When viewing the home, buyers must pay attention to any comments made by the current occupants. Mumblings such as ‘we are going nowhere’ or ‘this is our home’ should warn buyers that the occupants might refuse to move out when the owner of the property sells. Buyers should always include a condition that stipulates that the seller has the obligation to ensure that the buyer moves into a property that has no occupants,” Motaung recommends.
Buyers who keep this advice in mind can purchase an affordable home that stands to grow in value as this suburb continues to develop. Goslett, therefore, encourages investors to keep an eye on this market and watch for potential opportunities.