Here's a 2 bed apartment in Green Point on the market for R1 900 000 which attains a monthly gross rental of R7 200. The flat is 62m^2 so R1 900 000 means the cost per m^2 is over R30 000/m^2 so this is in no way a value for money buy.With a 100% bond the monthly payments are currently R18969/month which means the difference between that and the rental is R-11769 which is over 160% of the gross rental itself!
The bond costs alone are R139 000 which is over 18 months (one and a half years) of rent. Subtract rates/levies, maintenance and vacancy costs and the net rental income is probably closer to R6000 if not lower. Here's the yield graph:
To break even on cashflow with the gross rental requires a deposit of just over 62% of R1.17 million. Even with a 50% deposit you need capital appreciation of 1.44% to not lose any money. Paying for the entire property in cash nets you a return on investment of 4.55%. I think there are transaction accounts out there paying equivalent interest than that.
This block looked familiar and so I went diving off into the archives and found that in January 2008 the rental for a 2 bed apartment in this block was R7 000. In Jan 2010 it's R7 200. That's an annual rental increase of 2.8%, well below inflation. However the asking price in 2008 was only R1 250 000. Me thinks someone needs to sell at R1.9m to avoid losing any money (and hopefully make a profit) from paying in to cover the bond for the past few years. Specuvesting at it's finest.
4 comments:
I'm suprised this apartment is now on the market, it being so close to the Stadium for the SWC.
I'm suprised it is not being advertised on gumtree for R5000 p/d rentals.
I'm NOT surprised the price has escalated 50% in 2 years, even through a global economic meltdown, this is CT after all, the "bubble that never bursts(TM)"
The bubble will never burst in Cape Town as there are too many investors, too many people with a lot of money.
My fellow anon, you are misguided to think that ct will not pop.
you forget some facts:
50pc of purchasers are from foreign lands. They have suffered at home 30pc declines plus.
Your real estate has had tremendous growth - 400pc growth, and has started to fall
your middle classes are under pressure from new bond structures, high interest rates, and higher cost of living than ever before
Investors look for returns. There are no roi's left here. The worldcup will be the turning point and then people will start to bail.
I suggest u bail at a small lose now. It's going to be a Celine for the next 18months after July to a level where Investors are interested again 30-50pc from here
this is all against a back drop of political uncertainty
best of luck thinking that the wealthy Investors will keep it propped up!
This is a Arthur Quinton development ...in other words, a rip off of note.
Developers like this sell off plan in much fanfare and hook buy to let idiots.
This property is worth about R1.2 million , if that, and the seller will soon realise that when there is no buyers or even people keen to view for that matter.
Post a Comment