In any town there are less and more attractive suburbs and areas to live in.
In Bloemfontein, I think you would agree that Woodlands is a more upmarket area than say Ehrlich Park.
Prices of land and properties in these areas will reflect the level of demand.
People are all different and buy for different reasons.
Some buy for prestige, some for convenience, some for the necessity of a place to stay.
But does it pay to buy in these expensive areas?
Well, it all depends on what you are looking for.
When building a home the cost of building is essentially the same wherever you built, allowing for difficult sites such as hillsides.
What differs is the cost of the ground.
A piece of ground in Ehrlich Park is much cheaper than the same-sized piece of ground in Woodlands.
When buying a home you usually buy with your heart not your pocket.
While if you are buying for an investment you would buy with your head.
By that I mean you are willing to spend more on your own home than you would on one to rent out – after all you want to enjoy where you stay.
Owning property in top-end areas will cost you the same for water and electricity, but will cost you a lot more for rates and taxes.
You might get a little more rental for the same house in a better area but nowhere near enough to justify buying an investment property in an expensive area.
From an increase in value basis, while upmarket areas go up in value in rand terms more quickly than ordinary residential areas, you usually find that the percentage increase is much the same.
For example, a R3 million home in Woodlands might go up to R3.3 million this year but your home in Bayswater might go up from R2 million to R2.2 million too.
So, do suburbs or areas change in value outside the standard rate?
Sure they do if there is a reason to do so.
Currently, the very expensive R4 million homes are in real distress.
Many of their owners have crippling bonds and have lost their income, but there is no demand for homes at that price.
So, prices are dropping rapidly and these homes are very negotiable.
On the other hand, affordable homes under R1 million are in strong demand and their prices are actually rising.
Changes in circumstances also changes the price of property in a particular suburb.
Willows, for example, is not likely to increase in value at the normal rate because it is used generally for students at the Central University of Technology (CUT).
The majority of CUT students tend to come from homes without a lot of spare cash.
So rentals in the area – and thus prices – are stuck because there is little potential for growth.
However, Bayswater has seen growth in prices because properties are on large pieces of land, have biggish houses and are conveniently located close to schools and shops.
All the new developments at Wild Olive, Somerton and others north of the city have been done at new prices and have made existing homes seem a bargain by comparison.
So, what size of property do you actually need?
If you have mummy, daddy and two children you need three bedrooms.
Whether it costs R1.5 million or R5 million you still need three bedrooms only.
The choice is yours.
I would rather live in a home and area that I feel comfortable in and not have the burden of a super large bond, trying to impress people.
I can do far more nice things for myself with the money that I save.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.
