Those contemplating buying a residential property franchise in South Africa are sometimes advised to opt for a district in which there is a wide variety of housing and house prices, the thinking being that this can cushion the franchise from the fluctuations and swings which inevitably occur in the property market.
One relatively new franchisee in the Rawson Property Group, Craig Allsopp, bought into the Durban Glenwood franchise for this reason. Serving such relatively upmarket suburbs as Morningside and Musgrave (where Allsopp shares a common territory with a co-franchisee) as well as such less expensive districts as parts of Glenwood itself and Umbilo, Allsopp’s team was from the outset (they kicked off in February 2012) able to offer homes in a huge price range – from as little as R300,000 to R7 million plus.
In 2012, said Allsopp, the market was exceptionally flat, with most of the action in the lower price categories. It was here, therefore, that he focused initially. The average price in the area he serves is now around R700,000 and 70% of his franchise sales are still in the R400,000 to R900,000 bracket and here demand remains very strong.
Nevertheless, said Allsopp, in recent months for the first time since the recession struck in 2008 interest is being shown in the R1,5 million plus homes. Recently, for example, his team sold a R2,5 million house in Musgrave at the asking price on the same day that it was listed. What is more, for the first time much of the stock on which people have sat for a long time is now slowly being sold.
Running a rental division (with a stock of 20 managed units), Allsopp has also been able to benefit from the steadily increasing demand for rental units throughout Durban and its surrounding suburbs.
“The yields have responded to the increased demand,” said Allsopp, “and it is now difficult to get a sectional title unit, even in the least expensive areas, at under R5,000 per month, while the popular price range is R6,000 to R12,000. We have many units renting at between R10,000 and R15,000 and recently a home in Essenwood achieved a R22,000 per month rental. The average rental in the more expensive areas that we serve is now around R15,000 per month.”
As in all the less expensive suburbs of South Africa’s big cities, a high percentage of potential buyers and tenants have previously disadvantaged backgrounds and it can be necessary to help them to go through their credit records so as to be able to qualify for a bond or a lease, said Allsopp. His team takes this process very seriously, with the result that they have increased their hit rate on bond applications to approximately 75 %, which is very high for his area.
Allsopp predicts that the marked recovery he is now witnessing will forge ahead for at least another two years and will be accompanied by ‘significant’ price rises, perhaps as high as 10% to 12% by the end of 2015.
“Certainly,” said Allsopp, “trading conditions have become a great deal easier now than in early 2012 when we started and the desirability of these high density popular areas, boosted by their low prices, will, I am confident, continue to attract the emerging class and ensure that returns here remain good – a fact of which buy-to-let investors should take note.”