Despite difficult economic conditions, inner cities remain attractive to both investors and tenants. Reduced travel time, beating the rising price of energy, easy access to technology, education and employment as well as a range of social and economic amenities fuel the deep demand for affordable accommodation in the downtown areas of SA’s metropolitan spaces.
Investors are able to capitalise on higher yields when compared with traditional residential classes as well as increased opportunity for densification and the utilisation of existing infrastructure. This is a real attraction considering the recent increases in construction costs.
Our research indicates that nationally there is an increased preference and demand for smaller, self-contained units such as bachelor and one bedroom apartments. This offers affordability, security and privacy.
With 90% of the over 92,000 households living in Johannesburg’s inner city renting their accommodation, the demand for decent and affordable accommodation is high. Investment opportunities are diverse and vary depending on the area.
There is strong rental demand in KwaZulu Natal, particularly in Durban’s various inner city areas driven by young professionals with a preference for self-contained bachelor units. High-demand areas include Glenwood, Berea, Umbilo, Bulwer, Morningside, Greyville, Point and Beachfront.
The Cape Town residential property market is still trending upward, with the Voortrekker Road Corridor Improvement District a key node to watch.
In the Eastern Cape, Port Elizabeth’s private sector revitalisation of inner city historic buildings is complemented by the Nelson Mandela Bay Development Agency’s involvement in the upliftment of the CBD, including North End, Central, Korsten and Richmond Hill. Demand is being driven partly by students and young professionals.
To further explore various trends and developments, TUHF recently conducted research in conjunction with the National Association for Social Housing Organisations and Johannesburg Housing Company and found that in 2015, residential vacancies were at record low of 5% in the Johannesburg inner city, a trend that seems to have reversed in the 2016 period with some suppliers indicating above-average vacancies within the last quarter of that year. Still, the 10-year trend shows that inner city apartments have outperformed an equivalent townhouse investment by 27% (2002-2013).
Inner cities offer unique risks and challenges — urban management and perception issues are ongoing concerns, as is corruption. An additional concern is the continued rise in administered prices, which negatively affects affordability for tenants. However, we have strong economic governance, along with a legislative environment that gives stability and recourse if necessary.
TUHF offers finance to entrepreneurs in the property sector to purchase and then convert or refurbish buildings in the inner cities of SA.
Despite the many challenges, the prospects for inner city residential property remain strong. The demand is ever increasing: SA needs safe, low-income rental housing close to people’s places of work and TUHF is poised to meet this need on an ever-increasing scale.
• Jackson: CEO; TUHF
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