Ensure a solid property investment

Now that the South African property market is slowly moving past the effects of the recession, it is anticipated that demand for leisure properties will slowly increase, says Adrian Goslett, CEO of RE/MAX of Southern Africa. “However,” he says, “It should be remembered that the leisure property market always lags behind the property cycle by about a year to 18 months. Therefore, while noteworthy recovery is not expected in this sector for some time to come, there are currently great leisure investment opportunities available to buyers.”

Goslett says that South Africa’s reintroduction to the global economy post 1994 elections gave the country an opportunity to showcase its investment opportunities to the world. More than ten years on, during the height of the property boom from around 2005 to 2007, luxury leisure and lifestyle properties gained popularity with both local and international buyers.

“Areas like the Atlantic Seaboard in the Cape, the Garden Route and the KwaZulu-Natal north coast saw a massive surge in demand for luxury and leisure properties, as did the Big-5 areas in the northern regions of the country. Soon high-end lifestyle estates that catered to a multitude of needs were being developed in scenic areas around the country.”

Coming off a low base, these kinds of properties were relatively affordable by comparison to international standards and therefore snapped up, and still more were developed to cater to the continuous and increasing demand. “While many of these properties were highlighted in the media as belonging to international investors, many high-income local buyers, typically professionals and corporate executives, contributed significantly towards the upper real estate market transactions in the leisure and lifestyle category,” says Goslett.

In an effort to meet demand for these kinds of properties, the supply increased, thereby making holiday homes a more affordable investment for many South Africans. A second home away from the hustle and bustle of the city became a lifestyle requirement for many South Africans that could easily be obtained.

Then, in late 2008 the global recession hit, and with many households having to tighten their belts and closely watch their wallets in order to survive, second homes and leisure properties fell right off the list of priorities. In fact, many of these homes were put on the market and demand for leisure property declined.

“Be that as it may, South Africans are spoilt for choice when it comes to deciding upon a location for a leisure property and the leisure market stock currently available includes a range of properties in a variety of leisure destinations and price brackets around the country,” notes Goslett.

“Property is still considered to be a strong asset class in which to invest, particularly because it is still the only asset class where an investor can take advantage of gearing,” Goslett says, “And those looking to invest in a leisure property should remember that historically these kinds of property offered very attractive returns.”

However, Goslett also notes that the property investment landscape has changed, and buyers need to be absolutely sure of their investment before they commit financially. As with any property investment, leisure buyers need to establish a few key factors that will influence their return on investment potential. Goslett provides the top five aspects holiday home buyers should scrutinise carefully:

1.      Location

While it’s all been said before, location remains ever important, so buyers should research the area and establish the level of property appreciation it has achieved over the past year, how well maintained the area and its facilities are and establish the general market conditions prevailing in the suburb.

2.      Into the future

Property is a long term investment, which means buyers should not just look at the property and the area as it is now, but find out how it will be in the future. “Leisure buyers should look at future developments and infrastructure planned for the suburb, as well as zoning and transport routes or nodes that may affect the tranquillity of the area,” Goslett says.

3.      Find out about the funding

There is no point in investing in a holiday home that is going to put extra strain on your finances, so most importantly, holiday home buyers need to consider their financial position, paying particular attention to the acquisition costs such as a deposit, transfer fees and conveyancing fees, as well as the impact of possible interest rate increases, ongoing monthly maintenance, security and insurance costs and the rates, taxes and utility tariffs in the area.  

4.      Going the distance

Holiday home buyers should also consider the practical implications of managing a property in a different town and consider appointing a professional rental management company that can conduct regular inspections and screen, select and place tenants. These fees need to be added into the overall budget.

5.      Use or lose

While a holiday home could always generate rental income during times when it is not in use by the owner, there is no point in owning a holiday home that will seldom or never be used. Goslett says leisure property buyers should carefully consider how much use they will make of the property in the years to come to establish whether or not the purchase will be worthwhile.
With any property purchase, a good investment decision can only be assured if a buyer has done all the necessary homework and comparisons and is sure that the investment they are making is worth the financial commitment they are laying down to acquire it, says Goslett.
“While the recession has meant that property is not appreciating at the rate it once was, astute property investments still have the ability to provide investors with solid returns,” Goslett concludes.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us