West Coast still a good investment

The coastal property market is distinctly divided into two markets, the sale of residential homes and the sale of vacant land. In terms of the latter on the West Coast, it is a niche market that has and can still provide lucrative investment returns for buyers.

Reg van Selm of Nationlink Projects, who specialises in the sale of vacant land on the West Coast, provided insight into this niche market looking at trends that have emerged and what prospects lay ahead for investors.

"Over the past three years easy credit and inexpensive money have played a significant role in the demand for land in the West Coast property market. Surprisingly for developers, the high demand for land and pace of sales caught them out with very little available stock. This resulted in them marketing stock ahead of services, which meant that buyers could delay the transfer by up to a year," says Van Selm.

Selling coastal land on this basis resulted in buyers acquiring a few properties with small deposits, with the sole purpose of reselling at a profit before transfer took place. Van Selm notes that most of these sales were concluded with very high bonds. In fact, some bonds were even as high as 100%. "This allowed buyers to conserve their cash and use it to acquire more properties. Investors were inevitably looking for the best returns on their cash, which the property market offered. Over the past three years, alternate investments such as savings accounts and the stock market were not nearly as good as property returns," comments Van Selm.

Looking at the current market for vacant coastal land in the West Coast, he says that as the interest rate hikes started to take their toll on the marketplace, land prices simultaneously started to level out. "Buyers became more astute and resisted the high prices, which Van Selm notes has resulted in the general levelling out of the marketplace.

"Early this year along the West Coast, particularly at Yzerfontein, Langebaan and St. Helena Bay, coastal plot prices reached new price levels. Beachfront sites were valued at R1,5m to R2m, and sea view sites ranged in value from R400 000 to R800 000. indeed as new developments came onto the market, so the extent of plots reduced to between 400m2 and 500 m² in order to keep prices low," he says.

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Now sea view sites in the R350 000 to R400 000 price range are still popular and selling well. Interestingly enough, nothing has changed from three years ago when buyers were opting for maximum bonds. According to Van Selm, buyers continue to go for maximum bonds (sometimes 100%) to conserve cash. "They prefer the delayed transfer concept as well as all costs to be included in the price," he says.

A negative factor affecting the present demand for coastal investments on the West Coast is the increase in petrol prices, resulting in buyers looking at coastal land nearer to major towns and cities. "Nevertheless, the belief in coastal land as an investment is still very strong. We see this in a growing demand for smallholdings located near the sea, with easy access to nearby towns for shopping facilities," comments van Selm

In terms of new developments in the West Coast area, he notes that in order to obtain an approval for new land development, property must fall within the S.D.F. (Special Development Framework) and the urban edge of the town. If these specifications are not met, approval cannot be obtained. In addition, van Selm points out that environmental issues have caused major delays in new scheme approvals.