For capital appreciation, buy less expensive properties in your area of choice

Residential property prices in the high demand, and urban and suburban areas of South Africa’s bigger cities are still increasing in value each year, so what should prospective buyers look for?

Bill Rawson, chairman of the Bill Rawson Property Group, says that the one fundamental piece of advice remains as valid as ever:

“Buy one of the less expensive homes in the best area that you can afford,” he says. “If you can possibly avoid it, don’t buy in the top price bracket of the area.”

He believes that homes bought at the lower end of an area’s price scale tend to appreciate faster than those at the upper end. They benefit from being associated with more expensive properties.

“In Constantia, for example,” says Rawson, “any home bought today in the R3 million to R6m bracket is likely to be worth around R1m more two years down the line. On the other hand, a Constantia home bought in the R12m plus bracket, although still a great investment, will probably not appreciate at anything like the same percentage.

“If you are buying at lower prices you shouldn’t be deterred by the deficiencies or unsatisfactory features in the home you are contemplating buying. Rather you should plan from an early stage to improve these features, extend the building and install as many modern and exciting finishes as is possible.

“These improvements, if tastefully done, using good materials, will almost always add double their cost to the value of the home. But every effort should be made to pay for such improvements in cash.”

He says that in the last two decades far too many people – especially young people – have overcommitted themselves. In many cases this then means that they are severely cash strapped and short of funds for many years to come and then end up paying out far more on improvements than they should.

“Enterprising people who have funded improvements from earnings, rather than bank loans, have reaped the rewards of adding value to their properties and, eventually, selling them at significant profit margins.

“In the last four or five years,” he said, “certain homes in Observatory, Rosebank, Rondebosch, Claremont and Kenilworth, on which fairly simple improvements have been made, have been doubling their sale value every three to four years.”

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