Guide to investing in property
Investing in property can be a real boost to your income, if done correctly, according to John Roberts, chief executive officer of Just Property Group. Property investment can be complicated, but a sound property strategy is a vital component of a well-rounded portfolio.
He explains that one way for growing a property portfolio is a process known as ‘gearing’ - specifically leveraging the first property to acquire a second investment property.
Anyone entering the property market for the first time takes into consideration several essential aspects.
The most important among these is whether they are prepared for the investment and responsibility that accompanies home ownership, followed fairly swiftly by the research to establish available options, neighbourhoods and restrictions imposed by financial limitations.
There is the underlying realisation that home ownership is a major commitment, not entered into lightly and that property acquisition affects financial well-being both immediately and for the foreseeable future.
Buyers to opt for well-run councils
Every homeowner wants the municipal services they pay for to be provided and the area they live in to be properly managed.Jan Davel, managing director of the RealNet estate agency group says this is why it is disappointing to learn that only five percent of South Africa’s municipalities are currently able to achieve a clean audit report from the Auditor General.
Davel notes that a clean audit is a metaphor for the overall performance of a municipality, because when the financial affairs of such an entity are not managed properly, it is often the case that nothing else is either, from rubbish collection and street lighting to health services, water purification, libraries and all sorts of other facilities, as well as making provision for future repairs and improvements.
GBCSA multi-unit residential training
As the world's population steadily grows, people are moving to cities more than ever, increasing the need for suitable housing in urban centres.Multi-unit residential homes are an ever-more attractive option for city dwellers, and greening these developments are important to ensure sustainable cities going forward.
To meet this demand, the Green Building Council of South Africa (GBCSA) released their Multi Unit Residential (MURT) Green Star SA rating tool in 2011.
Subsequently, the GBCSA will host training courses on how to get the most out of this tool. The MURT impartially measures the environmental performance of design, construction, and phases of new and refurbished multi-unit residential buildings.
The course will include an overview of the rating tool, and insight into its aspects, such as the fundamentals of the Green Star SA rating system, which types of developments the rating tool can be used for and how the rating tool connects with the new SANS 10400-XA energy efficiency requirements. As well as the categories and credits within the tool and an overview of the certification process.
ST unit improvements require approval
In most sectional title schemes in South Africa, owners are forbidden from altering their units without the permission of the trustees, who may then be obliged to consult the local municipality. This is according to Nancy Todd, the Rawson Property Group’s Western Cape regional sales Manager.
She says that Rawson rental agents often find that a new owner will buy with the clear intention of changing and upgrading the unit, possibly before moving in.
“However, the rules in almost all schemes make it clear that the owner cannot do so without the trustees’ consent and they may well have to get the approval of other members whose units are sited nearby,” Todd says.
Buyers should remember that building work can be disruptive to those living in close proximity.
On a freehold property this is usually only a minor problem – but on a multi-unit development, where neighbours may actually be sharing common walls - any building activity is likely to be a nuisance, especially if it goes on after hours.
Home loan finance difficult to access
Many South African citizens do not earn enough money to qualify for home loans to buy property and will have to rent for the rest of their lives. This is according to Paul Henry, managing director of Rawson Developers who says South Africans, and indeed many people in the developed world, are entering a new era in which financial constraints make it more and more likely that they will be ‘locked out’ of the property market.
This is according to Paul Henry, Managing Director of Rawson Developers, who points out that young people in South Africa today do not earn enough to qualify for a bond.
“Since the introduction of the National Credit Act (NCA), they can all too easily fail on the scoring system that the banks now apply and this means they simply do not get bonds,” he says.
Henry says the situation is further complicated by low end income earners not qualifying for a bond at today’s low interest rates and when rates rise, the chances of them getting a bond will be reduced even further.
Buying a historic home in South Africa
For people who love the style and atmosphere of heritage properties dating back decades or even centuries, the investment in such homes is forever treasured. Whether bought already fully-renovated or still in need of some love and attention, the romance and emotional pull of an older home holds enormous appeal to this category of buyer, says Annien Borg, Pam Golding Properties (PGP) managing director for the Boland and Overberg regions.
However, she says buyers have to take note that the historic pedigree or even national monument status does not necessarily add significantly to the price of a property.
“A well-maintained, fully-renovated historic property may well command a premium price, but the value may actually lie more in the location of the property and its size, than in its historic significance.”
Many of these homes were built in prime central locations, or close to attractive natural features such as rivers and mountain backdrops, and many of them still occupy significantly larger properties and have far larger rooms than the average modern home.
Top 10 rules for investing
In a world where everything is seemingly costly, we all want to make more money, invest in stock markets, buy homes and save enough for retirement. Those who already own homes may choose to invest in the residential buy-to-let market or invest in listed property funds or other investment vehicles.
However, if you one of those who chooses to invest in listed property, there are 400 companies listed on the Johannesburg Stock Exchange (JSE), 42 of these are listed property companies which account for 3.4 percent share of the JSE.
Listed property companies own properties including shopping malls, office buildings, industrial properties and hospitality in some cases.
But before you invest, it is essential to understand the market – this would include reading financial literature (newspapers and magazines) and speaking to financial experts for additional advice, according to the JSE.
The JSE points out that investors should only invest the money that they can afford to live without for a long period, five years for example to enable the investment to grow.
Choose a home to suit your life stage
A homebuyer’s life stage will largely determine the type of property that will appeal to them and meet their requirements. This is due to the fact that a home is often a reflection of the owner’s lifestyle, says Adrian Goslett, chief executive officer of RE/MAX of Southern Africa.
Goslett looks at the different property investment options available for each life stage.