Jozi property tops SA

Property in Johannesburg is proving to be one of the most resilient areas in the country with prices having held up strongly over the past year. According to Absa’s quarterly housing review, prices in the Greater Johannesburg region rose 8.9 percent year-on-year in the fourth quarter of 2009. This compares with a 3.8 percent increase in Cape Town for the same period.

According to Jonny Novick, Managing Director of Vered Estates, while there has been a focus on property in Cape Town ahead of the 2010 FIFA World Cup due to its popularity with tourists, the latest figures from Absa show that for property investors Johannesburg offers much potential in the long-term.

"There has been a lot of fuss over the World Cup and the lucrative rental opportunities it is expected to bring to South Africa and especially for Cape Town. However, as the Absa numbers show, there are many other important factors that need to be taken into account when investing in property and a serious investor needs to diversify their portfolio beyond just seasonal short-term holiday lets."

Cape Town rental demand can be seasonal

Novick says rental demand for property in Johannesburg is high throughout the year, making it a better investment as vacancy levels tend to be lower and annuity income more consistent. Cape Town can be seasonal and one needs to take that into account when looking at residential property investment.

Despite the increase in prices in Johannesburg over the past year, statistics published by the Global Property Guide also show that property in Cape Town is often still far more expensive to buy than Johannesburg, with the result that investors in the Mother City are seldom able to receive the same level of gross rental yield as their Northern counterparts.

According to the guide, as at October 2009, the average cost to buy a one-bedroom apartment in Johannesburg is R800 000 with a rental value of R10 250 per month, giving a massive 15 percent yield per annum. To buy a small apartment in Cape Town, the guide suggests you would need to double the property cost figure to R1.5-million, giving an average rent of R9000, implying a rental yield of just seven percent.

"When one considers the yield on a typical fixed deposit account in South Africa is currently at around seven percent, a rental yield of above 10 percent is a good return for a property investor. This shows that the Johannesburg property market still has much to offer the canny investor," says Novick.

Major strides in infrastructure

Novick adds that Johannesburg has also made major strides in infrastructure development in the city over the last few years, with tax incentives for the CBD, the Gautrain high-speed rail link, the newly launched Bus Rapid Transit system and the Gauteng Freeways Improvement Project.

Finally, he believes that as the economic hub of South Africa, Johannesburg has a major advantage over the country’s other cities in terms of potential growth in property prices.

"As the financial and industrial powerhouse in Africa, Johannesburg continues to attract vast numbers of new residents, businesses and capital every year and with a burgeoning middle class, demand for residential property is only set to increase."

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