Investment Property Search: Sheffield Manor (The Bugle)

With interest rates at an all time low, the prospect of leaving savings in a money market fund yielding a gross 5% before tax, does not make any type of investment sense for the medium to longer term. CPI inflation is currently 5%. Your after tax, real return on cash is therefore negative. The prospect of investing in high yielding property, in an area with high and growing demand for rentals, using debt finance to leverage the amount of equity contributed, is of real interest. 

The cost of money is the lowest in forty years. It is still a buyers market making pricing competitive. If we are to consider which options provide us with the highest possible yields, our focus moves to the market priced between R700,000 and R1,500,000. One of the most successful developments to emerge along the Dolphin Coast, which addresses this affordable market segment, is Sheffield Manor. Providing excellent security with 24-hour access control, a 25m lap pool and club house, waterways flowing into a bass fishing dam, walking and jogging paths around landscaped surrounds, it is easy to see why the sales have been so impressive. 

A total of 321 apartments make up the Sheffield Manor development, with 80 units currently available. Of these 13 are available for immediate occupation, 27 are expected to be completed and occupied by December 2012 and a further 40 will follow as part of phase four. The current pricing ranges from R629,000 for a one bedroom apartment to R979,000 for a three bedroom option. Rental yields range between 7,5% to 8% and there is no shortage of tenants. Body corporate levies and municipal rates represent approx. 16% of the gross yield, providing a before tax net yield of approx. 6,7%. Capital appreciation of these apartments will no doubt accelerate as the development matures, the landscaping grows up and the community takes shape. An analysis of the 149 transfers that have already been registered in Sheffield Manor, since September 2011, indicates pricing that has ranged from R489,000 for a small 49 sqm unit to R1,110,000 for a more spacious 98 sqm apartment. These registered sales have shown a selling price per square meter range from R8,696 to R12,868. The average selling price across all these transactions is R736,107. 

Our rental department is experiencing the acute lack of stock, which is frustrating would be tenants, and Sheffield Manor is one major development solution to this problem. Our Seeff specialist agent for Sheffield Manor, Kelvin Isaac, lives on site and understands the details and subtleties that make Sheffield Manor a great investment option.

Hilltop Private Estate a "Must See" option (The Bugle)

The recent Sales Talk article referring to the Hilltop sites bordering on Zimbali Coastal Resort being the most expensive residential property in South Africa, raises the prospect of imparted value by association to the properties within Hilltop Private Estate. 

This beautiful “boutique” estate covers an area of 15ha and is small in comparison to the other estates found within the area. It consists of 37 single residential sites, 6 “duet” sites (two homes per site), 3 sectional title schemes that have been developed and a fourth development site which is being converted into 10 freehold sites, currently being developed by Stedone Homes and known as The Ponds. 

The existing sectional title schemes are known as: (1) Kingfisher Rise consisting of 22 freestanding units. With demarcated gardens, double lock-up garages and large under-cover patios these units are great for pet lovers. Pricing of these homes, as an average and measured by actual registered transfers, is R1,773,684. Although the units look similar in terms of layout and design, significant quality variations are evident, which has a large influence on achievable pricing; (2) Sunbird Way consisting of 29 apartments in 7 blocks, with a great communal pool, and average pricing in terms of deeds office reported registered transactions of R1,764,286. These apartments range from well-sized two bedroom units to larger three bedroom options. With exceptionally strong rental demand for homes in this scheme, a unit at the right price is one of the best investment property options available on the Dolphin Coast; (3) Sulawezi consisting of 10 superior quality units which are located on a site overlooking a pond and greenbelt and the Zimbali Coastal Resort golf course and conservation area. The registered average pricing has been R3,264,286.  The Hilltop Estate sectional title units provide great value and have been largely underpriced over the past few years.  

The single residential vacant land offers some of the best value land opportunities along the Dolphin Coast. The site sizes average over 1,500 sqm and offer spectacular views and surrounding landscape. For less than R1m you are able to purchase a site sharing a boundary fence with Zimbali and South Africa’s most expensive home as your neighbour. For anybody considering buy-to-let investment properties or vacant land opportunities within the greater Ballito area, this is a must see estate.

The Great Buyers Market of 2012 (The Bugle)

The great buyers market of this five year cycle is expected to continue for the next six to twelve months if we are to correctly understand and interpret the recently released economic data. The South African Reserve Bank publishes the Leading Business Cycle Indicator index and if you want to understand where demand for property will be heading, this is one of the key statistics to keep a close eye on. The most recent figures released indicate a decrease in this index by 1,1% and demonstrates that we are heading towards a period of softer general economic growth and the inevitable impact on residential and commercial property demand this translates into. 

As estate agents we cannot make or control market supply and demand forces, but we can understand all the forces that influence demand and supply and then provide intelligent and informed advise to our clients. The FNB Valuer’s Demand and Supply ratings still currently show that the supply rating exceeds the demand rating, the difference being a measure of market strength, and we can expect this gap to translate into lower real property prices, as our market strength figure comes under pressure.

The overall price movement of homes is another vitally important statistic to track. The FNB House Price Index showed a further slowing of its year-on-year growth rate in August 2012 to 6,6% from July 2012’s 7,8%. Real House Prices, after adjusting for CPI inflation, have slowed only slightly from 2,85% to 2,76%. This was largely due to the significant decrease in CPI inflation from 5,5% in June to 4,9% in July 2012. Producer Price Inflation has also steadily decreased to 5,4% indicating that manufacturers are finding it difficult to increase the prices of their goods. Lower inflation is good news as the prospect of further interest rate relief from the Reserve Bank by further decreasing the repo rate at their next monetary policy committee meeting becomes more probable. 

Buyers of residential property have never had it this good: the lowest interest rates in 40 years and an extra-ordinary choice of exceptionally well-priced options available to choose from. As most sellers of property are also buyers, what you can expect to lose on the swings you will make up on the round a bouts. Knowing the above, the recommendation to sellers is to be far more competitive on pricing and not to live in hope that pricing will somehow increase in the medium term. Buyers should enjoy this current cycle and to remember that nothing lasts forever.

Semi-gration trends in South Africa (The Bugle)

People vote with their feet. When it comes to investigating the competitiveness of regional economies within South Africa it is useful to look at residential property transactions and the reasons why people buy and sell. By measuring the level of emigration-related selling (people leaving South Africa) and the “semi-gration” related selling (people selling in one region so as to move to another within South Africa) we can get a clear sense of which regional economies are able to attract the most skilled people and thereby make them the most economically competitive. 

FNB have done this statistical exercise using deeds office data and restricting the transactions analyzed to those people who have sold in one region and bought in another within 12 months of the transaction. This provides a quantifiable proxy for semi-gration activity within the country. The survey focuses on the major metro regions with the Ethekweni municipal boundary being the proxy for KZN. As the Dolphin Coast is largely within the Kwadukuza municipal area, the current wave of buying within our region is excluded from the figures. The emigration selling rates recorded indicated 5% of all selling within Ethekweni, the highest across the regions, and 2.3% for Pretoria, the lowest, 2.7% for Cape Town and 4.7% for Johannesburg. Emigration related selling is significantly down from a few years ago. The number of sellers in each region selling in order to relocated to elsewhere within South Africa says much about the region’s ability to provide career opportunities or a perceived lifestyle. The total Gauteng average is 8.5% of all sellers, with Ethekweni a similar 8.7%. Cape Town is however significantly lower at 5.7% indicating a far lower rate of selling in order to re-locate elsewhere from the Western Cape. 

The level of foreign buying as a percentage of all buying by region provides further insight into the confidence foreign buyers have within a region. Cape Town wins this race with 5%, while Johannesburg comes in next with 3.5%, followed by Pretoria (3.2%) and Ethekweni (3.2%). For the majority of sellers relocating within South Africa, the reason is for work purposes. For KZN 69% of those sellers re-locating were doing this for work purposes. However, for Gauteng the same figure is only 48% indicating the economic competitiveness of Gauteng and that people moving away from Gauteng would typically be doing this for lifestyle reasons. The semi-gration destinations by major provinces show that those people from Gauteng are choosing the Western Cape (36.3%) firstly as their preferred relocation destination, followed by KZN (21.1%) and Northwest province (11%). For those relocating from KZN the choice of destination is overwhelmingly Gauteng (56.7%), followed by the Western Cape (24%). For those who actually do leave the Western Cape, Gauteng (53.2%) is the main choice.