Real Estate Investor Magazine July/ Aug 2020 July 2020 | Page 35

Sandton Central offers prime property
Sandton Central and its most immediate outskirts;
Morningside, Rivonia, Benmore, Sandown and Strathavon,
have been holding its own despite the implementation of the
National Credit Act in 2005, the financial crisis of 2008-2009,
the rolling out of load shedding in 2014, and high interest
rates in the face of a weakening economy.
The last two years, however, have witnessed a growing lack
of investor confidence, even in prime areas such as Sandton.
This has seen desperate sellers reduce their selling price,
which has created a buyer’s market. And as property prices
are expected to decline further over the next few months,
we will see some of the best purchase opportunities in more
than a decade, whether you’re looking to buy a residential or
investment property in Sandton.
The effects of the pandemic on the property
market
The low interest rate, the lowest it has been in half a century, is
expected to be lowered again by September, which will make
it even easier to qualify for a home loan. The interest rate is
expected to remain low for the next 18 months.
The gross household income needed to purchase a R1
million property has decreased by around 20% since 2019.
This, coupled with the lifting of the threshold for transfer fees
to R1 million that was announced in February’s Budget, has
been favourable for first-time property buyers.
The greatest activity has been in the low to mid-market
range, around R1.5 million, with budgets stretching up to R3
million in prime areas, such as central and greater Sandton.
Despite the reduction in property prices, potential investors
are playing a wait-and-see game as they opt to rent instead of
buy, until they determine what the future holds.
Why now’s the time to buy an investment
property
An over-supply of properties coupled with a lower demand
means that now’s the best time to buy a property in Sandton
Central.As Baron Rothschild said: “Buy when there’s blood
in the streets, even if the blood is your own.” This contrarian
investing principle encourages investors to go against market
trends – buy when others are selling and sell when others are
buying. This results in the markets becoming temporarily over
and under-priced. Though it might be a risky strategy, it pays
off in the long-term.
The poorer the market performs, the greater the
opportunity for profit in the future. On average, property
investors who had the courage to buy property after the last
financial crisis of 2008-2009 have witnessed their property
value increase by more than 50% in the last decade, with midvalue
houses fairing the best.
What the work-from-home trend means
for property investors
The Covid pandemic and national lockdown have changed
work dynamics. Tenants now consider Fibre and WiFi as a nonnegotiable,
whether it’s inclusive in their monthly rental rates
or an additional cost. After bearing the cost of installation, the
property owner can either negotiate the ongoing cost with
the tenant as a percentage of their monthly rental costs or
allow the tenant to settle the costs with the service provider.
Vacancies & good standing tenants
An investment property in a well-located area like Sandton
Central, that’s perceived to be safer, offers a comfortable lifestyle
and is close to key amenities, such as good schools, private
hospitals and shopping malls – is unlikely to stand vacant.
Prime areas remain in high demand, despite the fact that
many tenants will downgrade or opt for co-sharing properties
until financial stability returns. However, in many cases
monthly rentals are becoming more expensive than bond
repayments on the same property.
To give Sandton property investors an idea, 81% of
residential tenants in Greater Sandton remained in good
standing during the first quarter of 2020, according to the TPN
Rental Monitor. When it comes to good standing according to
rental value, 86.30% of tenants who pay between R7 000-R12
000 monthly remained in good standing. They appeared to be
the least affected segment of the market during lockdown,
with a post-lockdown vacancy rate of 8.6%. Meanwhile,
84.28% of tenants within the R12 000-R25 000 remained in
good standing with a post-lockdown vacancy rate of 11.3%.
Predictions for the future
In the past, it might have been easier for an employee to get
a home loan than it was for their employer, namely a selfemployed
business owner or a commission earner. I sincerely
hope that lending organisations undertake a mindset shift
when it comes to offering home loans to such entrepreneurs,
especially if their business is growing.
Markets will remain depressed for the next year, due to
the economic effects of the lockdown, a lethargic economy,
an over-supply of properties, and prolonged online property
shopping before a purchase is made.
Competition between the major lenders has resulted in a
lean towards 100% bonds, while ABSA is offering a 105% loan
to value ratio. Buyers with available capital for a deposit should
take advantage of this situation.
If you have taken the decision to buy a property in the
near future, take the risk and you might pick up a wellpriced
bargain. You are likely to pay off your bond through
rental payments and if you wait long enough for the market
to recover before selling, you will likely profit for future
investments.
SOURCE SRS REALTY
Stephen Brian Szewach
Stephen is the principal of
Sandton Rentals & Sales and has
been a property investor for 20
years with numerous properties
in Sandton. He is the founder
of the Property College (www.
propertycollege.co.za: launching
August 2020), a learning and
educational platform that assists
property buyers with property
investment strategies.
SA Real Estate Investor Magazine JULY/AUGUST 2020 31