Real Estate Investor Magazine South Africa Real Estate Investor Magazine - June 2017 | Page 7

EDITORIAL VIEW
Back to Property
Investment Fundamentals
T
he health of the economy has a direct impact
on the South African property market.
Economic activity will always affect the
market’s performance and strength. However, if
you understand property market fundamentals
well, you will be better equipped to make more
informed decisions.
A stronger economy fuels demand for growth
for accommodation and urbanisation in the
cities. Property investment fundamentals include
understanding supply and demand, interest rate
levels, inf lation, demographics, and population
growth. As an investor, it is important to
research trends in habits and migration of people,
unlocking activity in local suburbs and assessing
global trends.
Investors need to be reminded that only two
things generally affect property price change
‒ supply and demand. Prices will generally
rise if demand is high relative to supply. The
underlying fundamentals on the demand side
include the construction of new roads, transport
nodes, businesses, shopping centres and schools.
The fundamentals on the supply side include
the development of new estates, repurposing of
existing land, demolishing of houses, building
of new apartments and the gentrification of the
cities. The CCID has done an incredible amount
of research on property developments in the Cape
Town CBD.
In both Cape Town (CBD, Woodstock and
Green Point) and Johannesburg (the main nodes of
Johannesburg, from CBD, Rosebank and Sandton)
we are seeing a massive supply of residential
apartments coming on stream. Cape Town is
experiencing an inf lux of people moving from
Gauteng and the KZN to the greater Western Cape
area ‒ a trend known as ‘semigration’. According
to Samuel Seeff, the Cape will continue seeing a
strong migration of people looking to move here
from the rest of the country, if they can afford to
do so.
Johannesburg has a very clear, 10-point plan
driven by new City of Johannesburg Executive
Mayor, Herman Mashaba. A large part of the plan
is related to property, which includes revitalizing
the inner city of Johannesburg, fast tracking
delivery of title deeds, bringing on affordable
accommodation, producing an official house
waiting list and producing a list of semi-completed
houses.
In Cape Town’s CBD, we are seeing B and C
grade commercial office buildings with increased
vacancies. This puts pressure on landlords to
either upgrade those buildings or convert them to
alternate uses such as residential and/or mixed-
use developments. Demand from investors for
residential accommodation in the CBDs is driving
the uptick. Both affordable housing and premium
accommodation are critical focus points for the
cities as they rapidly evolve.
According to Chairman of Western Cape
Development Forum, Deon van Zyl, “the
development of affordable accommodation close
to transport nodes, close to the city where people
work, that takes into consideration social issues
is a critical focus point for property developers
and investors in the future”. The challenge for
developers is to protect future investment projects.
The key questions, however are: at what cost and
to whom?
Successful investing.
NEALE PETERSEN
FOUNDER & PUBLISHER
“In the real estate business, you learn more about people, and you learn more about community issues, you learn more
about life, you learn more about the impact of government, probably than any other profession that I know of.”
JOHNNY ISAKSON, U.S. SENATOR
www.reimag.co.za
JUNE 2017 SA Real Estate Investor
5