When in 2002, just ten years ago, Mvelaprop began developing the huge Tyger Waterfront area, the pace at which this was brought on stream matched that of any mixed-use development ever seen in South Africa. In under five years over 1,000 new apartments, as well as, a considerable quantity of office and retail space had been completed and in most cases sold.
Many of these buyers, seeing how attractive the water-related scene was and how good the majority of the designs were, expected to be able to achieve high rentals from day one.
That expectation was not, at first, met as the large number of units ensured that for some time supply exceeded demand. Rents could not therefore be spectacular. However, the appeal and the convenience of the development were bound in the end to become so widely recognized that this would become a sought after residential area and all stock would be taken up. This, in turn, would, it was hoped, mean that it would become a landlords’ market.
This positive scenario is now starting to become a reality, says Paul Abbott, Rawson Properties’ franchisee for the Tyger Waterfront, but it will probably take another 18 months for rentals to respond with a big upward swing.
Abbott’s rental portfolio now has 175 units and because of the demand, he expects to be able to double this in the next year. What is particularly gratifying, he says, is that at the moment, he is operating on a vacancy factor close to 0% – no sooner does a unit become available than it is snapped up by a tenant.
The increasing demand, Abbott predicts, will inevitably result in all rents rising. Right now, he says, the biggest demand is for units renting at below R5, 000 – and this demand can never be fully satisfied. In general one and two bedroom units are able to attract rents from R4, 400 to R7, 000, while the three bedroom apartments rent at anything from R6, 500 to R15, 000 per month. A premium is usually paid for water frontage positions, but several set in back complexes like Cornerstone (in which he himself lives) are able to charge anything from R5, 500 to R7, 000 per month.
The improving rental situation, says Abbott, has been noticed by those investors who keep a close eye on property trends. Realising that they can now get a net return (i.e. after paying their rates, levies and the agent’s commission) of 6%, as well as, capital appreciation (if not immediately certainly down the line) they have been steadily climbing back into this market.
On the sales side, says Abbott, prices, although improved, have in most cases not yet returned to the levels at which the majority of their apartments were originally sold. Here, too, sales are picking up, with the result that in the first six months of this year his franchise has already more or less matched their sales of last year when they were responsible for 53% of sales in the precinct.
Many owners, says Abbott, are still offloading, often at discount prices, as they have hit hard economic times. Conversely, many of the buyers are fairly ruthless bargain-hunters looking for especially good deals. This scenario, too, he says, will probably change within about a year.
On the sales side, the big demand, as in the rental market is in the lower brackets – one and two bedroom apartments can still be found for prices as low as R520,000 and any unit in the R500,000 to R600,000 category tends to find a buyer quickly. However, says Abbott, there has also been an increased buying demand for units priced from R700, 000 to R800, 000. The luxury apartments at the waterfront, which can be priced up to R3 million (in the case of a real penthouse suite) are still sticking on the market but he has no doubt that these, too, will start to attract buyers within a year or two.
