How Do Some Properties Maintain Value in Ever-Changing Markets?

The South African property market, like any other real estate market, experiences its fair share of fluctuations and changes. Economic conditions, interest rates, government policies, and consumer preferences all contribute to the constant evolution of property values. Yet, amid these shifting tides, certain properties manage to maintain their value, standing as resilient investments even in uncertain times.

So, what makes these properties so special? Here are a few factors that contribute to their resilience:

Location: The Golden Rule

It comes as no surprise that location plays a crucial role in maintaining property value. Desirable areas with easy access to amenities, good schools, transportation links, and a safe environment tend to hold their value well. Properties in established and sought-after neighbourhoods like Sandton in Johannesburg, the Atlantic Seaboard in Cape Town, and Umhlanga in Durban are examples of locations that have historically shown resilience in the face of market fluctuations.

Infrastructure Development and Upgrades

The value of properties is often linked to the quality and accessibility of infrastructure surrounding them. Infrastructure developments such as new roads, public transportation systems, shopping centres, and recreational facilities can significantly enhance property values in an area. Additionally, ongoing maintenance and upgrades of existing infrastructure contribute to the long-term value of properties. Areas benefiting from these developments tend to attract buyers and tenants, ensuring demand remains steady.

Economic Stability and Growth

A stable and growing economy provides a solid foundation for property value appreciation. South Africa has experienced its share of economic challenges in recent years, but certain regions and cities continue to demonstrate resilience due to their economic stability and growth. Locations with a strong job market, diverse industries, and a growing population tend to maintain property values, as they attract both local and foreign investors such as The City of Cape Town.

According to an April 2023 article written in Bizcommunity by Greg Dart states that the business and lifestyle incentives being offered by the City of Cape Town are appealing: 60% less load shedding than the rest of the country, a cash-for-power plan buying electricity from businesses that feed back into the grid, and an across-the-board property rates relief package peaking at 52% for homes valued below R5m.

According to Lightstone, South Africa’s formal property stock volume totals 6.8 million and is valued at R6.1tn. The demand for property in the Western Cape is evident in that the province accounts for a substantial 29% of the national value, with only 18% of the stock.

Supply and Demand Dynamics

The dynamics of supply and demand are key drivers of property value. Areas with limited land available for development and high demand are likely to see property values rise over time. This is often the case in established neighbourhoods where land scarcity drives up prices. Conversely, areas with oversupply or stagnant demand may struggle to maintain value. Therefore, it's important to consider market conditions and the balance between supply and demand when evaluating property investments.

According to property economist Rode & Associates, apartment vacancy rate across South Africa has dropped from a peak of around 6% in fourth quarter 2009 to the current 4%. This means that there is a high demand for apartments, which makes it more likely that investors will be able to find tenants and generate rental income.

Aesthetic Appeal and Unique Features

Properties that offer unique features and aesthetic appeal tend to stand out from the competition and maintain their value better. This could include historical significance, architectural design, scenic views, waterfront access, or eco-friendly features. Such properties often attract buyers who are willing to pay a premium for the distinct characteristics they offer, ensuring long-term value retention.

Rental Potential and Income Generation

Investment properties that generate consistent rental income are often viewed as stable and valuable assets. In South Africa, the rental market has remained robust despite fluctuations in property prices. Areas with high demand for rental properties, such as university towns, business districts, and tourist destinations, can provide a steady stream of income and help offset costs, making them attractive investment options.

While the South African property market is subject to fluctuations and changing market conditions, certain properties have proven their ability to maintain value over time.

 

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