Areas and Places

The hard facts of central Southern Suburbs title apartments confirm that investors here are in the pound seats

John Birkett standing in front of an apartment block in the central Southern Suburbs.

The property reports that have emanated from Cape Town’s “academic belt”, regarding sectional title units in Mowbray, Rosebank, Rondebosch, Newlands, Claremont and Kenilworth have in recent years been so bullish that they can on occasions be almost hard to credit.

“However,” says John Birkett, now franchisee for the Rawson Property Group’s Claremont franchise, “most reports are by no means exaggerated.”

Birkett then gave a list of the prices that are being obtained today:

Studio units now sell for R650,000 to R900,000 and can pull in monthly rentals of around R5,500 to R7,000.
One bedroom units now sell for R850,000 to R1,6 million and rent at anything from R4,500 to R10,000.
Two bedroom units sell for R1,2 to R3 million (with the strongest demand being around the R1,5 million mark) and such units rent out from R8,500 to R18,000 per month.
Three bedroom units are now selling from R1,6 million to R4,5 million and they rent out at R10,500 to R24,000 per month. In this price bracket the most popular units are those priced around R2,5 million.

“In every category mentioned,” said Birkett, “today’s prices represent an increase of 18% or more. For example, a 92 m2 flat in Rosebank that we sold in September last year for R1,050,000 was resold in November at R1,675,000, again an increase of over half a million rand. Admittedly it had had R200,000 worth of renovations done in the interim, but nevertheless, the price achieved was the highest ever recorded in that complex.”

“In general, therefore, today’s investors can expect a 20% increase per annum, provided they allow themselves to be guided by an experienced estate agent in making their purchase – it has to be realised that there are a few more secure investments because the tenants in this sector tend to be reliable, regular payers and vacant units very seldom remain empty for long.”

Is this market about to peak, has it reached a bubble burst stage? Birkett says that he is confident that demand will continue to outstrip supply and the prices are nowhere near their top level as yet.

So what advice does he have for prospective sectional title investors in the academic belt?

“The best tip that I can give is to buy at the lower end of the market – capital appreciation at the lower levels is always greater than it is from the higher levels,” said Birkett.

“Secondly, I would advise the owners of old units to consider seriously upgrading such features as the flooring, window frames, light fittings and, if at all possible, refurbish the kitchen and bathrooms. Smart, up-to-date interiors in these areas add greatly to the value and appeal of the unit.”

“Thirdly, I would advise very strongly against managing the unit by oneself – that is best left to a rental agent with experience in this field who is capable of carrying out thorough credit checks on prospective tenants and (equally important) of disciplining the sort of tenant who does not pay on time and/or does not care properly for the unit.”

“Fourthly, I would advise the prospective buyer to check very carefully just how efficient the body corporate of the complex in which he is hoping to buy is. Body corporate trustees sometimes see their main responsibility as being to limit expenditure and help keep levies down. This approach inevitably results in the complex beginning to take on a worn out shoddy look, and to lose grandeur. Take good care, therefore to investigate your body corporate before entrusting your cash to a unit in their scheme.”