South African property doesn't come cheap

Investors looking for property in South Africa need to be prepared to pay top dollar, as the country continues to suffer from a shortage of affordable housing. Carollize Laing, First National Bank (FNB) Commercial Property Finance head of residential and affordable housing, explained that "demand for housing remains high, particularly in metropolitan areas as a result of rapid and continued urbanisation", and this is driving up prices.

Within the country this is causing a problem for the GAP market - those earning between R3,500 and R7,500. This is because there is is a lack of homes at prices these households can afford. "It is impossible to build houses at prices which would suit this segment, unless land and infrastructure costs can be minimised," Ms Laing stated.

This means that the market is reliant on rental tenure and to help increase stock in this segment FNB Commercial Property Finance, in conjunction with Kiron Projects, has launched the Windmill Park Project in Boksburg. This is a new set of high quality developments aimed at the affordable housing market, comprising 830 units. Prices range from R285,000 to R340,000 to buy, while average rental rates for modern two and three bedroom homes vary between R2,500 and R3,000. The developments also include play areas for children and open parks.

"FNB is very proud to be involved in such an exciting development such as Windmill Park. This is just one of the many flagship projects we as a bank are in involved in, and we will continue to add value and sustainability to the growing Affordable Housing market," Ms Laing stated.

With a pleasing rental value, these properties are also ideal for investors and the FNB has recently encouraged people considering South African real estate to think about property in this context. Michelle Dickens, managing director of Tenant Profile Network and Credit Bureau, explained that people should focus on the initial yield, a.k.a the income that can be expected over the next year divided by the property value.

Article by: Danny Bance - www.propertyshowrooms.com

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