The Orangerie: The Bloodbath Continues

Back in January we wrote how apartments in The Orangerie, which had been initially sold for well over R3 million were being sold by the developer for R2 850 000. It seems since then time has not helped those prices recover.

This ad is a new listing for a 2 bed apartment in The Orangerie.

The asking price? Now down to R2 500 000.

The Orangerie: If You Enjoy Losing R18 000/month

Reader DM sent us a link to a 2 bed apartment for sale at The Orangerie (how we missed you!). Here's the text of the ad:

The best of the best
What better place to live! tenanted until 31st December 2010 @ R8,000 p/m.

And the asking price? Only R2 850 000. Which means a 100% bond would require a monthly bond payment of R25 642/month.

So you can rent for R8 000/month or pay R25 642/month to own. To put that in perspective to get your bond payment down to the same level as the rent you would need to a down payment of around R2 million.

Anyway if you're buying for investment this is a terrible option (unless you enjoy losing R18 000/month), you don't need me to tell you that but here's the yield/cashflow graph anyway:

Down Payment	Monthly Payment	Cash Flow	Annual Income	ROI	Cap. Appr. Required
R0	R25642.19	R-17642.19	R-211706.28		7.43%
R285000	R23077.97	R-15077.97	R-180935.65	-63.49%	6.35%
R570000	R20513.75	R-12513.75	R-150165.02	-26.34%	5.27%
R855000	R17949.53	R-9949.53	R-119394.39	-13.96%	4.19%
R1140000	R15385.31	R-7385.31	R-88623.77	-7.77%	3.11%
R1425000	R12821.09	R-4821.09	R-57853.14	-4.06%	2.03%
R1710000	R10256.88	R-2256.88	R-27082.51	-1.58%	0.95%
R1995000	R7692.66	R307.34	R3688.12	0.18%	-0.13%
R2280000	R5128.44	R2871.56	R34458.74	1.51%	-1.21%
R2565000	R2564.22	R5435.78	R65229.37	2.54%	-2.29%
R2850000	R-0.00	R8000.00	R96000.00	3.37%	-3.37%

Orangerie: You Just Lost A LOT Of Money

Back in 2008 you could buy off plan a 2 bed/2 bath 120m2 duplex at The Orangerie for between R3 100 000 and R3 500 000. Today you can pick one up for R2 650 000.

That's at least a R400 000 drop in capital value not to mention the potentially hundreds of thousands of Rands in bond payments.

And the scary thing is a couple months ago a similar unit was on the market for R2 300 000!

Update: A reader just sent me a link to the latest (dated 3 Jan 2011) price list for the Orangerie

Here's how the prices compare:

Unit	Initial Price	Jan 2011 Price
AG 3	R3,31,2000	R2,850,000
AG 9	R3,445,000	R2,850,000
AG 10	R3,275,000	R2,850,000
BG 3	R3,289,000	R2,850,000
BG 4	R3,312,000	R2,850,000
BG 13	R3,346,000	R2,850,000

If you bought off plan back in 2008 I hope you negotiated your purchase price down. Waaaaay down. Also good luck selling your unit in the near future while it competes with unsold developer stock.

Asking Prices Crater At The Orangerie

Remember back in the good old days when a 2 bed/2 bath at The Orangerie was on sale for R2 975 000? I guess the R2 300 000 they're asking for it now can't be too much of an encouraging sign for current owners.

The scary thing is waaaaay back in 2008 you couldn't find a flat with the same specs as the ones above (+- 120m2 2 bed/2 bath) for less than R3 100 000!

Some Orangerie Gossip

Orangerie Week continues! There's nothing we love more here then a nice piece of skinner (that's gossip for you non-Afrikaans speakers). This from the comments section in an earlier entry on the Orangerie:

I have been told that all the flats on top floors were bought off plan by estate agents, before the public knew about the flats going to be built.

I do hope these agents are making sure that when they show potential buyers around the Orangerie they show them apartments that they don't have a financial interest in.

The Organgerie: Rent Vs Buy (Again)

Folks it's Orangerie week here on Cape Town Property Bubble, because it's the gift that keeps on giving. For instance here's a 2bed/2bath 157m2 apartment in the Orangerie for rent at R14 000/month. Despite overwhelming demand, five days later the same flat is now available for sale at R3 400 000.

On a 100% bond your monthly payments are R33 944/month, the difference between that and the gross rent being R19 944/month or about R240 000/year. Added to that the bond costs are R275 000, worth about 20 months (1 3/4 years) rent. And that's all for gross rent. Take away levies (which I will bet are not cheap in this block), rates and maintenance and the picture gets even worse.

Here's the yield graph:



To break even on cash flow you need to put down just under R2 000 000. I repeat to not lose ANY money at all you need to invest close on two bar. Paying for the place in cash you can expect a ROI of just under 5%.

The Organgerie - It Gets Worse

If you didn't like the 2 bed/2 bath flat in the Orangerie for R2 975 000, then perhaps you'll want to invest in a 1 bed/1 bath flat. Only R2 650 000. For 85m2 which works out to about R31 100/m2.

Rent Vs Buy: The Orangerie

Finally! After watching it being constructed The Orangerie in Orange Street is finished! Out of the way welfare pensioners (a CPOA old age home was demolished to make way for it)! We need some shoddily built overpriced apartments.

Anyway so we haven't had a Rent Vs Buy analysis in a while so why not today. Here's a 2bed/2bath apartment on the market for R2 975 000.That means on a 100% bond you will be paying R29 701/month. Or you can rent the exact same apartment for R11 750 (that's gross not net). Now to be clear I would never advocate anyone rent a 2 bed apartment for R11 000+/month but that's just what the asking rate is at the moment for this joint (and that's if they achieve it). The difference between the bond and the rental is R17 951/month meaning that after year one you'll have lost R215 000. And it gets worse, the transfer duty on this property is over R230 000, which means you could rent this place for two years and be in the exact financial position as someone who bought it, except they will have paid in over R600 000 in bond payments in that time. Will capital appreciation make up the difference in two years?

I'd just like to add a final thought here: For close to 3 bar I'd like a decent kitchen, not a 'kitchen nook' in the middle of the dining/living area or whatever name developers call it.

Here's the yield graph:



So a deposit of R1 800 000 is needed to break even on cash flow. Paying for the whole place in cash gets you 4.74% ROI and that's before levies (which won't be cheap for this place), maintenance and vacancy costs.

Anyone got more info on the Orangerie? Is it a ghost town? Let me know at capetownbubble@gmail.com