Real Estate Investor Magazine South Africa September/ October 2019 | Page 30

INVESTOR STRATEGIES
Inner City
Investor Guide
Investing in Durban CBD for maximum return on investment
BY KENDAL COWARD
Seventeen years ago, I started investing in
Durban’s CBD, during that time I have seen the
market change drastically, experienced the
excitement for what is happening right now and
the future plans rolling out.
D
urban has generally played second fiddle to Cape
Town for too long, we are finally experiencing the tide
turning as the spot light is now firmly on rejuvenating
and upgrading Durban’s CBD, where property prices are still
relatively “cheap” when factoring the rental yield.
A lot of the properties offer investors a positive cash flow
from day one, with the rentals covering your monthly bond,
levy and rate repayments. With the low property values this
allows for a low financial entry with values under R900,000
incurring no transfer duty.
Prices start as low as R250,000 for a bachelor flat with
rental income from R3,500. One bedrooms from R300,000
with rentals from R4,000. These properties are in high tenant
demand, however larger two or three-bedrooms are equally
in demand as tenants can rent on a “per room basis” between
R2,000 and R3,000 which increases the return on investment
and lowers the risk, if one tenant leaves or fails to pay income is
still received from the other tenants.
The type of tenants looking to rent in the CBD are working
singles, in transition finding employment at large Government
departments such as the various municipalities, SARS and
Transnet, hospital staff or the many call centres throughout
the city. Tenants earning R20,000+/month are looking to rent a
bachelor flat for R3,500/month, greatly reducing the tenant to
rental affordability risk when compared with the same tenant
wanting to rent entry level apartment in Umhlanga for R7,000.
From my experience over the years managing rental
properties, if tenants are credit checked thoroughly I have
had very few issues, with rentals being paid timeously. With
the shortage of rental accommodation throughout the CBD
tenants try to remain in good standing to hold onto their
places.
The Municipality, through Invest Durban have identified
100 problem buildings within the city, that harbour crime,
drugs and over-crowding, the clean out has begun and the
first building on South Beach (Rutherford St) was demolished
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SEPTEMBER/OCTOBER 2019 SA Real Estate Investor Magazine
last week as part of the rejuvenation project. A lot of these
buildings are found in the Point area which is an important
area to clean up to connect the drive through the City into
the Point Waterfront Development and uShaka Marine World.
This project has already had an impact on the market with
prices increasing in the South Beach and Esplanade (Victoria
Embankment/Margaret Mncadi Avenue) areas which offer
world class views of the beachfront and harbour.
With this, Durban has attracted major players in the industry
who specialise in uplifting an entire city precinct, such as
Florida Road, buildings around the Courts on Durban Club
Place and The River Town precinct between the ICC and the
beachfront. A Malaysian company is in joint venture with
Durban Point Waterfront Development Company and the
beachfront promenade extension is planned to be completed
this year, which will allow residents and tourists to move from
the harbour entrance to Umgeni River.
AREAS TO INVEST IN
Although there is opportunity throughout the city, I personally
believe there will be real growth on South Beach and The
Esplanade.
South Beach – this borders on the Point Waterfront
Development and a lot of investments are taking place in the
Point area entering this zone, so prices will spill over and with
it work opportunities and people will want to buy and live
close to work. Together with the lifestyle offered along the
beachfront.
Esplanade (Margaret MnCadi Avenue/Victoria
Embankment ) – most of these buildings are in good
condition and well run, they offer unparalleled views over the
harbour. New restaurants (9th Avenue Bistro) are relocating to
the yacht mall and Wilson Wharf is very popular. It is also an
easy walk into the heart of the City Centre.