Property as an investment

20 Nov 2019

Quick Update

A collection of news in brief from Investec Private Bank

Trends and nuances within a rapidly changing property market

At a recent Investec In conversation event, strategy and insights specialist, Kirsten Leeuw, shared the trends and nuances within the South African property market. Here follows an overview of her presentation.

Following her extensive research, Kirsten comments that change has never moved this fast, yet it will never move this slow again. The world will change more in the next 20 years than it has in the last 300 and the world of property is not excluded from these mega-shifts that are rewiring our society.
 
In South Africa, semigration is increasing as families, young professionals and retirees are moving to the coast and smaller towns in search of a better quality of life, a sense of community, more safety and security. Land reform remains a necessary topic, even though it has existed for over 25 years. The reality is that buyers need to upgrade their due diligence to include queries as to whether there are any land claims within a 10km radius of the property they are interested in.
“Change has never moved so fast, yet it will never move this slow again.”

  

 
 
 
Our expert In conversation panel discuss the potential and pitfalls of the South African property market.

 
On the panel:

Nozipho Mbanjwa (Moderator),  Nonhlanhla Mayisela (CEO of Izandla Property Fund), John Shane Lottering (Property economist and property risk consultant, Investec Private Banking - Credit), Marina Constas (BBM Law, specialising in sectional title developments), and Richard Towell (Investec Structured Property Finance specialist).

The demand for flexicurity

 
Flexicurity is the ability to create freedom without fear. Flexibility and stability at the same time. In the world of now, everything is on-demand, flexible and adaptable in real-time.
 
Especially for millennials, it’s more about access than ownership and there’s a definite shift from a permanent mindset to a temporary mindset. Rentals are increasing, people can return cars in 72 hours, you can rent designer clothes, even get divorced in less than 30 minutes. Between 2013 and 2025, it is estimated that the sharing economy will grow by over 2 200%.
 
However, this does not mean the end of ownership – in practical terms, it is, in fact, the inverse. There must be owners to enable access.
 “It’s more about access than ownership and there is a definite shift from a permanent mindset to a temporary mindset.”

PropTech is granting more power to the masses

 
Pioneering tech companies like Airbnb are also becoming a bigger ally in the property market. Through a traditional rental market, buyers might pay off a bond within 167 to 205 months on average. Through Airbnb, it is reported you can recoup the value of your property in 18 to 50 months, depending on the location and frequency of booking requests.
 

The power of many

 
Property is a commitment, that requires a long-term lens and short-term capital. Multi-buyers have become a force to be reckoned with, as the risk, the capital and the responsibility is shared. For many, this is the solution, some even consider purchasing property with strangers to eliminate any emotional ties in the relationship.
 
The ‘sandwich generation’ - where one generation supports others - has increased the number of grandparents, parents and children living under the same roof. Increasingly, two or three generations are buying (often bigger) properties together. It’s often the more cost effective, smarter option. This is changing the type of property families need and what they’re looking for.
 
And, with the lines blurring between work and home, more people work from home and require property that can double up as an office.
 
There is also the power of being single. In fact, over 50% of SA is single and more than 50% of homes are bought by individuals. 

 

It’s about the lifestyle

 
In the past, the property mantra was always ‘location, location, location’ – but now it is as much about lifestyle. When considering property, people take several factors into consideration, in addition to place and price. This includes the availability of transport, traffic, access to recreational and health services and security.
“It’s not about what’s inside, it’s what’s on top – the vibe is everything.” 
Neighbourhoods with culture and community - a ‘vibe’ - are also more popular, for example Soweto and Lenasia. These ‘villages’ are on the rise as people want to be part of a community where they live.
 
Growth nodes often emerge due to new transport networks, such as the Gautrain. Mixed-use developments allow people to work and play in the same space, for example Maboneng and Century City. People often move to little towns and areas that need a rebirth or revival, such as Hillbrow.
 
And in SA, nomadic properties are taking off. BlackBrick enables you to own an apartment, that’s equivalent to living in a hotel with all the frills. It defines itself as a community of travellers, a mobile and transient generation not confined by a traditional residence commitment. You can stay for a day or a lifetime. 

Shared space takes on a whole new meaning

 
Cities only take up 2% of the space on earth, but 50% of the world’s population live in cities. Africa is urbanising faster than any other continent at 4% and there is premium on space. So, why not rent parking or space in warehouses, cultivate a rooftop (hydroponic) farm or even rent out your kitchen for just a few hours?
 

From off the grid, to urban homesteading

 
Subsistence living is increasing, even in urban areas. Through solar, vegetable gardens, rainwater tanks etc, people can now turn their homes into independent self-sufficient spaces and live off the land.
 
Homes are being co-designed by Mother Nature, which means that homes are built with consideration of the trees, rivers and animals in the area. Amphibious architecture enables homes to float when there is a flood. Houses can live on both water and land, and can be almost completely (98%) recyclable.
 

And the future?

 
Homes are getting smaller and modular as we see in Ten Fold - a fully transportable unfolding house that sets up anywhere in minutes and is just as quick to move to the next location.
 
In the US, you can 3D print a home for R146 500 in just 48 hours. Over the past year, in a lab in Austin, a team of engineers and material scientists tweaked and tested the design of the Vulcan II, a massive machine that can 3D print the frame of a small house in less than a day. Later this year, it will begin printing a neighbourhood of more than 50 homes, creating a community for people to live in even faster.
 
Through blockchain technology, tokenisation has been introduced into property and in Manhattan you can already buy homes with tokens.