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Affordable housing market presents ROI opportunity

Macroeconomic fluctuations continue to make home buyers and sellers unsure about the property market. South Africans are feeling the consumer price pinch with food cost highs and a potential 20% electricity hike in 2018, some buyers are now seeking more affordable property options, especially in areas like Grassy Park in Cape Town.

FNB Economist John Loos explains in a recent Property Barometer that “Residential affordability improvements have been tough to achieve in 2017, with weak income growth negating positive impact of slow house price growth. Housing affordability improvements have proved to be difficult to achieve. While average house price growth is at pedestrian low single-digit rates, on a quarter-on-quarter basis it outpaced anaemic Per Capita Disposable Income growth in the 1st 2 quarters of 2017.”

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So, as we know the market is under pressure, however there remain many investment opportunities. Often the affordable market is overlooked despite it offering buyers a lot of value and the lowest cost per square metre. As banks apply stricter lending criteria, affordable homes in high demand locations remains a solid investment.

We’ve noticed first time home buyers are really taking to this market well as they are presented with potentially a greater return on investment whilst not getting themselves into a situation where their investment is no longer affordable.

When you save on bond repayments you have the freedom to explore renovations and other avenues that will increase the value of your property.

With Cape Town being a high demand area, we’ve seen semigrants from Gauteng and other regions snapping up homes here, this will undoubtedly influence the greater Cape Town property market and filter down to the affordable sector. Therefore, if you are able to identify an affordable home with great potential in an undiscovered gem of an area then you should take hold of this opportunity.

As always, I will strongly advise all buyers to seek the advice and assistance of an experienced agent that knows their market well. Although affordable homes in affordable areas present a lot of opportunities you don’t want to find yourself in a situation whereby you buy a home that shows no growth at all and the location’s market value decreases. An experienced agent is able to provide necessary insight into market averages of the area as well as accurately calculate all the necessary costs.

Property remains a fantastic investment opportunity and with the right guidance and information, there is scope for a great ROI.

Denis Quayle
Harcourts Maynard Burgoyne Principal