There is less than a 1% chance of finding a decent flat to rent in the Johannesburg inner city, as vacancies have reached a historic low that is likely to pave the way for new investor interest in the precinct, says national property investment and management group Trafalgar MD Andrew Schaefer.
The situation is the result of a steady increase in vacancies during the last 18 months, follow-ing an oversupply bubble in 2011, when about 2 500 units of commercial conversions were released onto the market in a short time. The vacancy impact was prominent in bachelor and one-bedroom units and the oversupply took a year to be absorbed.
“Two-bedroom units are in the highest demand in the inner city and are being leased for between R 3 000 and R 4 500 a month, so investors can expect yields of 11% to 15%. The trick is to invest in an emerging good area at the start of an upturn,” he says.
With the commercial conversion trend largely finalised and the available stock converted into residential buildings, a new trend of ‘demolish and rebuild’ is expected and Schaefer commends the contribution by the Trust for Urban Housing Finance (TUHF) for supplying the funding for inner-city building acquisitions and refurbishments.
While medium- and large-portfolio owners are the most prominent buyers, there is a growing number of TUHF-funded entre-preneurs that are steadily expanding their portfolios by buying small and medium-sized buildings as opportunities arise.
“Currently, there are a variety of buyer segments active in the market and well-priced stock is difficult to find. The trend is supported by the low number of vacant units and low arrears in stabilised buildings,” says Schaefer.