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The Property Investment Question: Cape Town or Joburg?

The city that is best for your investment in property depends on your short-term and long-term goals.

07/12/2017 12:29 SAST | Updated 07/12/2017 15:32 SAST
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Cape Town has traditionally been a more attractive option for investors, but not everyone is drawn to coastal living.

The general perception is that properties in Johannesburg are cheaper than those in Cape Town and offer better value for money, since they attract good rental returns and growth on investment.

Pam Golding Properties' Peet Strauss says there are various factors that make property purchases in each city a good investment.

"The trend in the Johannesburg market is more towards an income model, while the Cape Town market has bigger capital growth potential. Properties in Johannesburg are relatively cheap, compared to Africa and the rest of the world –– even South African standards," he says.

Furthermore, Johannesburg has in the past couple of years consistently shown good rental returns.

"One can buy for a bit cheaper than anywhere else, and rent for a bit higher. A savvy purchaser would buy now, especially if they're not planning on selling again and long-term income is their basis for investment."

But if you'd like to sell in a few years time for a return on your investment, then Strauss advises you to set your sights on Cape Town.

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Stick to areas with new developments

It's crucial to stick to traditional areas, in which there are new developments over a stretch of time, rather than just a "flicker" of activity. In Johannesburg, Strauss says there are pockets of value in areas like Rosebank, Sandton, Melrose Arch and Fourways.

That's owing to their ease of living and proximity to amenities -- a trend called urbanism, notable in the country's major cities. In these areas, everything you need is within easy reach, in neighbourhoods within walking distance of where you live, work, socialise, shop and more -- without committing you to daily commutes and endless traffic.

And there's a spike in South African property investors seeking these urban mixed-use developments, because more and more South Africans are looking for peace of mind that comes with added security and the convenience of amenities.

Strauss believes Melrose Arch -- Johannesburg's most famous mixed-use development –– is South Africa's answer to this global trend. "It's a walkable precinct, with all daily needs within walking distances ––offices, restaurants, shops, hotels, banks, medical services, health clubs, entertainment, and so much more," says Nicholas Stopforth, MD of Amdec Property Development.

What's more, a single-bedroom apartment in a development like Melrose Arch is likely to attract rental income of around R20 000 a month. And the rental market in Melrose Arch has been consistently very good for the past 11 years, according to Strauss.

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"Anybody that can afford something like Melrose Arch should buy now," suggests Strauss, "as the market is going through change and an upturn should be coming soon."

But wherever and whenever you decide to buy, it's clear that mixed-use is the way the world is going.