Several good reasons for buying units in new developments

In the last six months there has been a welcome return of buy-to-let investors to the property market, according to Mike Abrahamse, the Rawson Property Group’s franchisee for Blaauwberg.

He believes this market is now in a recovery and growth phase and that property investment makes sense at this time.

“There are at least 10 good reasons why ordinary South Africans should be considering a property purchase – and there are definite reasons for this to be done through developers of residential sectional title complexes.

“It is widely acknowledged that property prices are now rising close to 10 percent a year because there is a shortage of stock and a growing demand for it. This was foreseen by a few astute developers more than a year ago and they have recently been launching new developments to meet the needs of today’s buyers.”

He says that investors who buy through a property developer at one of the bigger sectional title projects, will usually have to wait 16 or 18 months for handover. This has the great advantage that during that time prices will almost certainly have increased substantially, although investors will only have put down a 10 percent deposit and won’t be asked for further payments until they take transfer.

“Buyers are protected by the disciplines that the banks exercise at these times. They won’t pay over the bond proceeds until all the necessary municipal rates clearance and technical certificates have been received. They will also withhold payment until they have received a letter from investors to the effect that they have checked their apartments and are satisfied with the general condition of their units.

“Additional buyer protection is afforded by the Consumer Protection Act, which ensures that a guaranteed minimum standard of workmanship is delivered. Also, builders must be registered with the National Home Builders Registration Council (NHBRC), so buyers know that the structure and roof are guaranteed for five years and the NHBRC will pressurise the builder to rectify any faults that appear.”

Buying in a new sectional title project, says Abrahamse, means that new owners’ maintenance costs are likely to minimal for five to seven years. It is also significant that in such schemes the body corporate will be responsible for all external maintenance of the project, raising funds for this by charging levies to every owner from the date of the scheme’s inception. The internal maintenance of the unit will remain each the responsibility of the owners.

Sectional title owners will also benefit from being ‘co-owners’ of the communal areas and facilities of the development – from the garden to the swimming pool, parking and foyer areas – and as members of the development’s body corporate owners have the right to vote on how the whole project is managed and run. They may also stand as trustees if they get the support of fellow members. This gives owners the additional ability to influence the future of the scheme and to see that its finances are kept in order and that the managing agent is operating efficiently.

“Taking all these factors together and looking back on the 35 developments at Blaauwberg, where I have been involved in the marketing over the years,” says Abrahamse, “I am convinced that today’s investors looking for sound, fast appreciating investments should consider new sectional title projects coming off the board in the next 12 months.

“If sectional title buyers invest in worthwhile developments, priced correctly in relation to market values, it is possible to have their tenants paying up to 70 percent of the monthly bond payments from the outset, assuming that investors have 90 percent bonds.

“As the years go by and rents increase, investors should be able to have a positive income stream on their investments while their units increase in value. In a scenario of this kind, it is then often possible for investors to buy more investment properties and so gradually build up their portfolios.”

Abrahamse says that in deciding which new unit to invest in, the age old advice of location, location and location is as relevant today as ever.

“By far the most important aspect of any property investment is its position. In the right location your apartment will always attract tenants and, if you want to capitalise on your investment, being in the right area should also assure you of a quick sale.”

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