Buy-to-let investors - particularly those who recently entered at the top of the market - have started to offload rental properties as many battle to service mortgage repayments on the back of higher interest rates and lower income yields.
Affordability issues are also forcing more potential first-time homeowners to rent rather than buy.
And because there's so many buy-to-let specuvestors despite the increased number of renters, rents themselvs are flat and not increasing.
Key question is where to find buy-to-let stock for less than R500 000. Joannou says CBD fringe areas such as Rugby, Brooklyn and Woodstock are good buys.
I drive to Brooklyn on my way to work in the mornings. If people are expecting to attract hassle free tenants there good luck.
Aengus MD Richard Rubin says it makes more sense for buy-to-let investors to buy in the inner city than in the northern suburbs of Johannesburg. Rubin says while the CBD may have been regarded as a no-go area for investors a few years ago, the northern suburbs are in fact now the riskier bet.
Rubin says inner city investors can earn an average income yield of 11%/year while investors in Sandton generally have to be satisfied with no more than 5%. Inner city investors can expect to boost monthly rental income by 20% to 25% by letting furnished apartments.
I read an article earlier this year in Finweek where Rubin claimed to be getting yields of 18%. Now he's getting 11% and also trying to sell some of his rental stock.
However, CBD investors aren't all doing equally well. Those who recently bought upmarket luxury apartments in Cape Town's CBD aren't seeing the returns initially anticipated. Joannou says upper-end CBD investments have generally been overpriced and investors are lucky to get yields of 3%/year.
3% yield a year! And with property over R900 000 appreciating at a pitiful 3% a year that has got to hurt.
3 comments:
I live out in the northern suburbs. I kept a copy of January's property magazine, available for free at the gas station. I picked up another copy last week.
I compared the two, and I identified a good few listings that were still there at the same price (6 months later, cause these muct have been listed in Dec to have made it to the Jan issue) and I identified some units where the asking price dropped eg. R1.7 million to R1.5, R825k to R790k etc
Thanks for the on the ground info! I'd like to know how much they were boight for in the first place and when.
The challenge most real estate professionals and property investor face when trying to market, sell, or buy property investment and rental income property begins with the seller's state of mind. Is the seller motivated to sell?
Unless the seller is motivated, the seller will typically insist on a price that is too high compared to the sales of similar property in the area, and as a result will generally ignore any advice that a real estate agent gives about the property's fair market value--thus nullifying the agent's influence on the seller altogether.
Post a Comment