Real Estate Investor Magazine South Africa February 2015

STRATEGIES By Koos Du Toit Buy-to-let I The big boys are getting in on the action n South Africa, with its rapidly growing middle class, strong urbanisation trends and a staggering housing backlog, the opportunities for residential buy-to-let investors are phenomenal. The Finance and Fiscal Commission (FFC) estimates that it will require R800 billion - and a ‘miracle’ - to clear the housing backlog of 2.1 million houses. The imbalance between the growing demand for housing and the swiftly dwindling supply has all but grinded to a halt. This is thanks to the banks’ stringent lending criteria and the enormous challenges faced by residential property investors, which has ensured that rentals have increased steadily. Nationwide rental stock shortages are evident. “It will require R800bn and a ‘miracle’ - to clear the housing backlog of 2.1m houses.” Over the last 10 years, thousands of P3 Investment Group members have taken advantage of this opportunity, which shows no signs of abating. Using a tried-and-tested system, which has been used by the world’s wealthiest for generations to create real wealth, these P3 members have steadily and responsibly been building small but highly profitable portfolios of wellselected and well-managed buy-to-let properties. These portfolios are producing not only ongoing, passive, annual inflation-linked income, but also ongoing capital growth, resulting in exceptional returns on investment. 28 February 2015 SA Real Estate Investor Listed property companies have mainly focussed on commercial and retail property. It seems the big boys of the property industry are now turning their attention to the vast potential in the residential sector. Around 14% of residential property is listed in developed markets and 15% of developing markets’ residential properties are listed. Global Real Estate Investment Trust (REIT) markets, particularly the US and UK, have experienced numerous residential listings recently, focussed on burgeoning cities like London and Berlin. In comparison, just 2% of investment-grade residential property in South Africa is listed. Currently, there are only two companies on the Johannesburg Stock Exchange ( JSE) with residential property exposure - Octodec Investments and Premium Properties. However, this is changing as interest in the residential sector is gaining momentum among South Africa’s listed REITs. For example, JSE-listed ‘SA Corporate Real Estate Fund’ has bought the Afhco Group and its property portfolio. This portfolio includes 27 properties in Johannesburg’s inner city, valued at around R953 million. Visual International, which listed on the JSE recently, plans to invest R33 million in residential property development projects over the next two years. The new Freedom Property Fund, with a R1.5 billion portfolio, has undertaken two residential developments largely in Limpopo and Tshwane, targeting the lowto mid-market segments. Since last year, JSE-listed Arrowhead Properties has invested more than R1 billion on residential stock and plans to list the first purely residential-focused REIT. RESOURCES P3 Investment Group www.reimag.co.za

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