The property market in South Africa is set for a jolt in the face of heated arguments for and against land redistribution that is set to happen any time soon.
On top of it all is the raging Xenophobic attacks. But a realtor, Abbey Adenigba, Chief Executive Officer of Abaden Properties Pty Ltd., believes these events should not pose a problem to Nigerians who invested in the market or plan to do so, if they seek advice of professionals on ground. Bennett Oghifo reports
South Africa’s property market is a huge investment terrain with stable yields, said the Chief Executive Officer of Abaden Properties Pty Ltd., Abbey Adenigba, who has done 20 years in that country, most of them dealing in real estate.
Regardless, deep feelings and other sentiments are filtering into the market, which is the reason Nigerian investors and prospective ones have been advised to talk to professionals, particularly in the wake of the impending land redistribution and recent Xenophobic attacks that targeted some real estate.
Xenophobic attacks effect on Nigerian investors…
Recent Xenophobic attacks left a dent on the South African image, as one of the drivers of investments into the country has been embarrassed by the negativity of xenophobia, Adenigba said. “Let me be sincere that xenophobia was not part of historic New South Africa, having lived there for 20 years.
Until 2008 that we started hearing xenophobia, for one reason that we should understand, some foreign nationals like Ethiopians, Somalians and Mozambicans including few Nigerians began trading in the township, wherein economic opportunity is limited. Obviously, it will come a time when the indigenes will be sensitive to the prosperity of some individuals within the same hardship township.
Again, most of these small traders don’t employ. Government did not take it serious because they do not understand the key issues in the communities. Another point is leadership, inappropriate statements about foreigners escalated attacks in 2015 and in 2016, which became worse.
Since the government has taken serious steps to address xenophobia, including litigations on anyone who induces strife against foreigners and their establishments.”
He said, “Most of our investors were worried, telephone never stopping ringing but by God’s grace we have segmented our property locations and none of our clients was affected.
Though, there are other dimensions of this phenomenon I can’t discuss here, nevertheless peace has been restored in all townships and suburbs, including the Central Business District. However, I advise potential investors to seek professional assistance for all types of investments in South Africa.”
He advised prospective investors to do proper consultations before venturing into deals and business partnerships. “I have found it funny that Nigerians avoid the professional Nigerians in South Africa, and likely in other countries, who can give them the true service and of course with fees.
Many cases have come up to me from colleagues in real estate, who are looking for a Nigerian buyer that paid a deposit and disappeared.
“There are cases where properties have been hijacked because they belonged to some individuals that cannot be traced. What I advise is that consultation is crucial in a regulated business environment like South Africa’s.
“The current political issue is no deterrent to the economic stability! I can bet on that, the market has already summarised the end of such issues.”
Other challenges Nigerian investors face…
There is the concern about repatriation of investments funds, Adenigba said, stating that “it is a huge concern. I have convinced many clients and assured the repatriation of their capital if the Reserve Bank is well notified. We do send rental income and sales proceed on behalf of investors to any part of the world.”
Property market in South Africa…
South African property market, Adenigba said, “Provides one of the best values for money investment, not only by returns but in the quality of what you get for your money and value retention, i.e strict building regulations, complex lifestyle facilities and good management.
Investors can access the market from as little as N20 million. We source mortgage loans up to 50% of the value of investment plus cost of acquisitions (9.5%).”
Share of the market do Nigerians occupy…
Adenigba said, “In terms of the market share of Nigerian owned properties, I think we are not yet at significant occupation compared to Europeans. Some Nigerians perceive the South African market as not good enough because the rent comes monthly and not annually like in Nigeria.
“Depending on the sector of property, commercial and farm lands are majorly owned by Whites since 1930 and it’s a contentious issue, I may not give you full detail, but we are anticipating a change through constitutional reforms.
“In the small business sectors, Nigerians occupy fair amount of retail outlets in the central business districts of Johannesburg. It’s much easier entry than big malls; with $10,000 you can start your trade, subject to immigration permit.
“In the residential market in South Africa, I can say Nigerians are represented, from luxury suburbs to high density areas of Hillbrow, Yeoville, Rosentenville and Parklands in Capetown.”
He said, “For diversified income, Rand investment is a good alternative for an average investor when compared to US Dollars and other currencies. It is the 6th – 7th most traded currency in the world.
It’s an economy that is sensitive to inflation and well managed by serious minded corporate and some political leaders with vision. Single digit interest rate has been maintained since 2009, which facilitated real investment and commercial property developments in Sandton Johannesburg, Cape Town CBD. The South African banks business is weighted by 60% in mortgages.”
Investment models and returns on investment…
There are some property investments models available to investors in South Africa property, he said. “What we have offered successfully over 15 years is in the residential investment for rental income and capital appreciation. Market demands for accommodation still make residential property one of the best models of investment. The rising continuum of young adults (the born-free) fresh graduates has made sectional title apartments attractive development acquisitions.
“In the last 5 years, I have introduced my clients to commercial and retail properties through the model of equities which makes it possible to earn income from A-grade malls and offices, which may not be singularly acquired, but returns in this sector give about 7-11%.”
He said rate of returns from residential property investment “can be between 12% and 13.5% gross PA. After operating cost, most yield is 7.5 – 9% net PA. This analysis depends on if you furnish the property and give it to operators on a guarantee rent. “Unfurnished accommodation, we source long term tenants and manage same, effective return is averagely 8.9% net PA. Vacancies are accounted to 2/3months in a year.”
He said, “Abaden Properties was established in October 2002 in my garage with 1 staff. Wholly black owned, the company is positioned as a boutique property firm, offering good value services in the last 14 years, our rental property portfolio is estimated nearly R68 million and we plan to grow it to R100 million by year 2018.
We represent investors, giving them best advice on property options in Cape Town, Durban and Johannesburg. We position our clients’ investments conservatively at locations the clients and ourselves will be free to access with reasonable growth.
“We have started acquiring properties for investors in the Nelson Mandela bay under new metropolitan management.”