Those who take time to identify property trends in Cape Town have regularly drawn attention to the increasing popularity of buy-to-let transactions. Some investors are so convinced of the value of this type of investment that they now own as many as 50 properties – and are continuing to buy.
This was said recently by Rowan Alexander, Director of Alexander Swart Property, which operates in Brackenfell, Durbanville and surrounding areas.
“These two precincts have proved especially well suited to the buy-to-let investment fraternity and they have been outstandingly profitable in the last five years,” said Alexander.
The buy-to-let investment surge in these two precincts, said Alexander, is driven by the huge increase in demand for rented property, which, in turn, is at least in part fueled by the difficulties many people today are experiencing in getting mortgage bonds. Almost 40% of potential buyers are listed by the credit bureau as not credit worthy and of the remainder a fairly large number tend to be disqualified on other grounds, particularly too much debt in relation to their earnings or the fact that their career paths are possibly not secure.
“While most categories of rented residential property are today giving excellent returns”, said Alexander, “the best returns come from sectional title properties and this type of property has proliferated in Brackenfell and Durbanville where many hundreds of sectional title units have been built in the last five years. These are today giving better returns and capital appreciation than similar homes in other Cape Town suburbs”.
“In 2016 the average sectional title home in Brackenfell sold for R675,000 and 515 were sold in that year. This year (2017) the average price of sectional title homes in Brackenfell was just on R1 million – a 48% increase – and by the end of this year Alexander Swart Property estimate that very close to 600 sectional title homes here will have been sold.”
In Durbanville, said Alexander, the picture is much the same: in the last five years Durbanville sectional title properties have increased 79% in value and a steady growth in sales will result in more than 600 sectional title units here being transferred by the end of this year.
“It may surprise some to know that the median price of sectional title property homes in Brackenfell is R80,000 higher than in Durbanville. The reason for this is that so many new sectional title developments have come on stream in Brackenfell in the last few years. If one takes the average rather than the median price, Durbanville could continue to have the higher figure. Average monthly rental returns on a R1,1 million Durbanville property are around R8,500.”
“If you couple the rental returns being achieved in the suburbs I have mentioned (where they are still rising in value at 10% per annum) to the capital appreciation, a total return on investment in excess of 18% per annum is now possible here. It is, therefore, not surprising that these areas are now so sought after by buy-to-let fraternity – and fortunately for all concerned the developers are responding to this demand with some very fine projects.”