Demand for property ensures appreciation in Stellenbosch

Excellent long term growth potential keeps Stellenbosch properties in high demand, says Dot Foster, Broker/Owner of RE/MAX Oaktree, whose office is situated in the Stellenbosch area.

4 Bedroom House for sale in Le Hermitage, Stellenbosch

“We have limited space in Stellenbosch, yet there is always a strong demand for property due to the area’s positioning, lifestyle offerings and of course, the university. Strong demand and limited supply has ensured that property value has seen excellent appreciation, particularly over the medium to long term,” says Foster. “A well-positioned, fixer-upper is an especially good buy with these kinds of homes offering the best appreciation in value over a period of two to five years.”

According to Foster the property market in the Stellenbosch area is divided into two distinct groups of buyers. The first group are those who are looking for residential properties that offer value for money and are close to the five schools in the area, while the second group are investment buyers who are purchasing properties for student rentals. “There is always a large influx of students to the area every year making a buy-to-rent property viable for investors - the closer to the campus the better,” explains Foster. “Important factors that investors should consider when looking to purchase a student rental are firstly security and secondly parking or lack thereof. Properties that offer both will secure a far higher rental income.”

She notes that for residential homes the average price range is around R3.2-million, while student apartments on the campus range from R1- million to R2-million depending on what it offers. “A great way for buyers to evaluate whether or not they are getting good value for their money is for them to firstly determine the potential capital gain of the property and secondly the potential rental income that can be achieved. A good example would be that of an investor who purchased a student apartment in 2008 for R850 000.  We recently sold that apartment for R2.1-million –a very good return in any market. Student properties in parts of Stellenbosch such as Welgevonden are also seeing healthy rental incomes with investors able to rent out a R1.5-million apartment for up to R12 000 per month,” says Foster.

From an investment perspective, Foster adds that the best purchase is one where the property is between 10% and 15% below the home’s market value. “There are several reasons why a property could sell for below its value, such as the seller being desperate to sell or the property was initially over-priced and has been on the market for too long. Both of these factors could have an impact on the gap between the asking price and the actual selling price,” explains Foster.
Adrian Goslett, CEO of RE/MAX of Southern Africa, says that while the situation of a home selling for less than its market value benefits buyers, it also underlines that importance of a seller listing their property for the correct price from the onset and working with the right agent who can provide them with guidance. Statistically, the longer a home sits on the market the less likely it is that a seller will achieve their initial asking price.
“Just as it vital for a seller to appoint the right agent, so too is it important for a buyer to have a good relationship with a trusted, reputable agent for them to be ‘in the know’ as to the good value for money opportunities available in the market. A buyer will often not benefit by shopping around with each and every agent. Agents, like everyone else, need to have loyal clients – then they will work harder to find the right property,” Foster concludes.

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