Where to Find Property Opportunities in Challenging Times
Recently, I spent some time going through the Final Report of the Presidential Advisory Panel on Land Reform and Agriculture published in May this year. What struck me was that “Expropriation without compensation” is referenced but not key. Urban development is the new focus. Much of Land Reform Policy involves activating aspects of the National development Plan – 2030. There is definitely an awareness that South Africa is walking a tightrope and we cannot afford to make too many more mistakes.
What also stood out were the personal testimonies within the report of individuals who were prepared to work their butts off to make a life and home for themselves and their families in the new South Africa and ended up walking from department to department, trying to persuade government to give them access to an already available piece of land, without success.
So people are trapped in poverty and running out of patience. They are pointing at government, government is deflecting to the old apartheid system and/or white minority. There are a lot of people taking initiative in self –development – but hitting unnecessary bureaucracy along the way.
These are some of the key property industry challenges in South Africa right now:
1. How to open our doors to a wider group of people that really need help with a step up and a step in to property ownership and investment know- how. Opening the doors very wide to a broad community of property owners who perhaps do not have a history, know–how or skill but are wanting to stake their claim.
2. Identifying commercial opportunities in a very tight economy.
3. Navigating the rapidly changing spatial development frameworks of the country.
Where are the opportunities for property investors?
Large scale residential development and re-development remains a focus in the private property sector, the provision of entry – level housing in particular. Already developers are making small fortunes developing high-rise buildings in the inner cities and surrounding areas.
However, our research indicates that people don’t want to buy the small apartments they are renting – other than for investment purposes – because they want to own a house of some description. This is a challenge partly because the spatial development framework is centered around urban development in the cities. We have found that banks are not really embracing new homeowners, so finance is difficult to obtain at a fair interest rate. Though there are government grants available, this is still a barrier to home ownership.
Retail has been a focus of developers for years, but this is coming under pressure as online shopping grows. People are looking for an experience rather than a mall, which means that shopping centres modified to accommodate the changing face of shopping behaviour are the future. Warehousing for online buyers is also a new gap, and investors can also look at storage opportunities in high density development areas.
What is our advice to property investors?
It’s not easy out there right now. But one of the age-old principles of investment is to buy when everybody is selling, so this is what we would advise:
• Be realistic in your expectations and look for opportunities in weak spots. A shopping centre that’s dying might be able to source a national tenant with a complete re-vamp and styling.
• Educate yourself. Don’t only look at the local market – look overseas for trends and direction.
• Think ahead and plan well. Try and stick to a particular area that you are able to service within easy driving distance. Don’t be too widespread geographically unless you have the footprint to manage.
• Now is also the time to start looking for some bargains in all areas.
South Africans are very resilient. We are used to thriving in stressful times and there is still a whole lot of innovation in the private sector when it comes to meeting our challenges. For smart investors, there are bargains to be had.