If you are considering property as an investment there are few better options than buying a unit in the early stages of a property development, says Louise Varga, area manager for Stellenbosch, Somerset West, Strand and Gordon’s Bay at Pam Golding Properties.
“All developments require buyers to put down a deposit, with the balance due on transfer. While the balance is only due on transfer, buyers will be required to show that they will be able to take transfer by way of a bond or bank guarantee on the balance of the purchase price. That is unless the buyer sells the unit prior to transfer.
“So the deposit is all you will pay until transfer takes place. Meanwhile, your investment will increase in value over the time it takes to build, so if you sell before or on transfer you stand to make a substantial profit. Unit prices increase with every phase, so it really pays to get in right at the start of a development.”
At the Newinbosch Neighbourhood Estate in Stellenbosch, for example, a number of buyers who bought in phase one have recently sold their units at a profit – less than a year after buying.
A townhouse that was purchased for R2.295m was sold for R2.8m. Buyers who paid R3.035m for a courtyard home sold it for R3.575m; a second townhouse that was bought for R2.11m was sold for R2.85m; and a homestead acquired for R3.35m was sold for R3.85m. This is significant capital growth with a very small outlay – and minimal risk, says Varga.
The Bosk apartment block at Newinbosch has sold out and units in phase two are currently on sale, featuring townhouses, courtyard homes and homesteads. The second apartment block, The Ilex, is due to be launched in October (2024).
“We expect these units to show comparable capital growth,” says Varga. “There is a huge shortage of stock in the Boland in general and Stellenbosch in particular, and the homes at Newinbosch offer excellent value.”
In addition to substantial capital growth, other financial advantages to buying into a new development include:
- New developments are often pre-approved by major banks, making it easier to get a home loan when buying a unit.
- No transfer duty is payable on a new development and the VAT due is usually included in the selling price.
- The transaction costs of buying a unit in a new development are often covered by the developer.
- Bond repayments usually only start once construction is complete and the property is transferred. In some instances, occupation can take place before transfer.
Buying into a new development offers several other significant benefits:
- The new SANS 10400 building regulations require that new buildings include energy and water efficiency fixtures such as LED lighting, energy-efficient geysers and water storage tanks. These fixtures are generally cheaper to install in new builds than retrofitting existing buildings.
- These energy efficient systems typically reduce running costs, so maintenance costs will be lower for the first few years.
- Most new developments are fibre-ready, and enhanced security features are often included reducing installation costs for new owners.
- In the design and construction phases many new developments allow buyers to choose the finishes of their home.
- New properties are more attractive to tenants than older properties, so if you are buying to rent you can expect to attract good tenants.
“When you buy into almost any new development at an early stage you can usually expect good returns, but this applies particularly to areas like Stellenbosch where stock is in short supply,” says Varga.
“Demand exceeds supply – for rentals as well as home sales – so capital growth is really outstanding.”
Issued by: Gaye de Villiers on behalf of Pam Golding Properties
