Wise landlords can turn a well-situated home into a solid investment
Corporate demand is driving the residential rental property market in Johannesburg to new heights, which means that the timing has never been better for investors to turn a well-situated home into a solid investment.
Shaun Groves, Pam Golding Properties (PGP) rental manager, Johannesburg northern suburbs says in recent times there has been a growing demand from corporates, particularly multinational companies, to rent residential properties for their employees in Johannesburg and its northern suburbs. “As we approach the 2014 financial and school year, corporate institutions are actively seeking suitable residential accommodation. As a result PGP is experiencing exceptional demand from a number of international corporate clients.”
According to Groves, these corporate clients are from a truly impressive range of sectors including: management and consulting, governments, embassies and councils; trading investment and importing; finance and banking; international airlines; legal; transportation; TV and communications; arts and culture, apparel; energy and construction. These are for the most part multinational companies which in some cases are seeking to accommodate hundreds of employees. A typical example is a large IT firm based in India, which is undertaking skills development programmes in Johannesburg and Sandton, looking to accommodate 400 employees per annum. Groves points out that, while many corporates rent homes on behalf their employees, others provide a rental allowance and allow their people to find their own accommodation.
“Landlords who have a solid grasp of this corporate market are able to position themselves to take advantage of the opportunities available and achieve excellent results. Indeed returns on such homes can average in the region of 10% per annum.”
Investors who are active in the corporate market appreciate the fact that they are dealing with highly reputable businesses and executives who are wanting to negotiate rental contracts of between one and three years. Another distinct advantage for landlords is that the Consumer Protection Act (CPA) of 2008 does not apply if the tenant is a juristic entity with an annual turnover or asset value of R2 million or more. This is highly advantageous to landlords as it effectively guarantees the rental term with no right to cancel.
Groves points out that the demand from executives and companies for accommodation close to centres such as the Sandton and Johannesburg CBDs is stronger than ever. Certain buildings within the Sandton CBD itself are at a premium while suburbs such as Bryanston, Westcliff, ‘the Parks’, Saxonwold, Dainfern, Fourways Gardens and Cedar Lakes are also attracting corporate clients and are performing particularly well. Many suburbs situated within a stone’s throw of the Sandton CBD such as Morningside, Parkmore and Sandown are also in great demand.
Groves emphasises that the corporate rentals market is fastidious and homes must therefore meet a number of exacting requirements before they will be considered. They typically need to be furnished upmarket clusters within secure developments. There is also, as already noted, a call for upmarket apartments that are in close proximity to the central business district of Sandton.
“It is critical that employees and their families are safe and for this reason homes need to have outstanding security. Properties must be located in secure, well maintained developments with armed response, alarms and garden security beams. Any empty land around a property is considered an unacceptable security risk to many corporates. At times major international companies may even send specialised security personnel to check the integrity of a property.”
“Each corporate obviously has its own requirements for its employees but we find that many are looking for some standard features. For example, three to four bedroomed homes with en suite bathrooms are popular for those executives with families. Swimming pools and underfloor heating are also in demand. Most executives and their families appreciate being close to work, good shopping, entertainment and other amenities,” notes Groves.
Suitable schools for their children are particularly important to many expatriates. Fortunately there are a large number of excellent educational institutions situated around Johannesburg. Groves says that many foreign visitors are happy for their children to attend one of the many good local schools available such as The Ridge School or Redhill School. For those who want their children taught within a specific language or culture there are also a number of renowned international schools in the Johannesburg area including the British International College, The French School Lycée Jules Verne and the American International School in Johannesburg.
“It is critical for anyone who is looking to invest in property to rent to obtain quality advice,” adds Groves. “One needs to be able to gain an idea of what kind of returns the home will fetch and which areas are the best to invest in. You also need to know what kinds companies are likely to rent a particular property and what features and facilities they are looking for.”
He says that few investors can afford for a home to stand empty and it is therefore important that they choose the appropriate property and price it correctly from the outset. “Remember that while multinational companies will generally pay good rentals for the right properties, they are also looking to make savings where possible and won’t tolerate being overcharged. You would also be well advised to choose a rental agency that can match your property to the most suitable corporate clients. For their part, multi-national companies look to a reputable agency that can connect them to the right landlords.”
“The multinational market is a demanding and highly particular market. However, if you can get it right it can be a very lucrative market to tap into. With the appropriate advice, solid investments that offer good returns can be made by potential investors in this market,” concludes Groves.
For further information please contact Shaun Groves at Pam Golding Properties Hyde Park office on 011 380 0000 or email Shaun.Groves@pamgolding.co.za.