LUCRATIVE FOR LANDLORDS The rental market in townships is soaring. Picture Michael Pinyana/African News (ANA)
Former townships’ lucrative rental market offers extra income opportunities to property entrepreneurs.
While the rest of Cape Town goes through a property slump, it is boom time in the townships.
As migrants, students and professionals return to the areas as tenants, emerging property entrepreneurs such as nurses, teachers, journalists, taxi owners, retirees and business people are buying up and converting properties to service this lucrative new rental market. Developments can be up to 10 units, are often double-storied, and vary in size from about 10m² to about 40m².
Rents range between R1500 and R3000. Development Action Group (Dag), an NGO with more than 30 years’ experience in urban governance, housing and community organisation, has called it “backyarding version 2.0 in that it is bricks and mortar, the accommodation is legal, safe (built according to approved plans) and affordable”.
This new type of rental accommodation in townships is located mostly in the back yards of properties. Entrepreneur Fernando Antonio, founder and chief executive of township property portal ZAkasi.co.za, says the rental market in the townships is “through the roof” and has had a major impact on property sales.
“You will even find some properties for sale include elements of a shack and this can be a selling point as it can create a rental income for the buyer,” says Antonio.
The stats corroborate these boom time findings: FNB’s five-year property trends data, from 2014 to 2018, shows areas FNB classifies as “former black township regions”, including Gugulethu and Khayelitsha, having price growth of 132% in that period. The rental market in particular is thriving with professionals and students looking for affordable accommodation in areas with good transport services.
Migrants and immigrants who are moving from shacks into bricks and mortar homes are adding to the market. According to Antonio, many people are seeking to buy property with the sole intention of letting, leading to a thriving the buy-to-let market.
“There is a huge opportunity in the townships for rentals. People are buying to invest in this.”
Ayanda Mbele, a property entrepreneur who has bought a few houses and extended them so he can rent them out, says most people can’t manage on their monthly incomes so are looking at ways to generate additional income by using the property they own.
They do this either by erecting a shack in the back yard to let or by building bricks and mortar accommodation. Some are buying property not to live in but to let.
“You just have to go onto Facebook to see how big the need is for places to rent in the townships. Everyone is looking for flats in the right price range, so those of us looking to make some money know we have to either buy property to service this market or convert our homes.
“One of the popular areas is Mfuleni as it is viewed as quite safe. But you will find property entrepreneurs also doing well in areas such as Nyanga, Kraaifontein and Delft, where the government built small houses on big plots that now can be built on for the rental market.” If returns are so good in the townships, why are more traditional agencies and entrepreneurs not digging in? “You sell and buy where you know,” Antonio says.
“Here you have owner-landlords who either live on the property or close by. Added to that many transactions here are done through word of mouth. “Bigger estate agencies complain about the fly-by-night attitudes of estate agents and sellers in the townships and just haven’t been able to get their heads around how things work in ekasi,” says Antonio.
“For one, in the townships, cash is king and sometimes overrides an agreement.
“It is troublesome that some sellers don’t want to wait three months for a transfer to go through. They will easily dump a potential buyer who has gone to apply for a bond if another person arrives with cash.
“We are trying hard to educate people so they at least get the title deeds for the house they are buying.
“You will find locals, instead of using a middle man, go to a police station, sign an affidavit about the house for sale, exchange cash, and the deal is done.
“I used to watch people putting up photos of their homes to let, buy or sell on noticeboards in spaza shops or at the train station. This was the township property portal.
“It was where I got the idea to create a township property portal that is phone-friendly for locals to buy and sell their properties.”
Former renter is now a happy owner
Accountant and businesswoman Uviwe Mzilikazi grew up in Ilitha Park in Khayelitsha, but when she went to university and then on to do her articles and started working, she lived in suburbs such as Bryanston in Joburg and Claremont in Cape Town.
“I had always rented but it got to a stage where I knew I had to buy property. I wanted to create a home for my two children. “The problem was that property was so expensive and these were my options: stay in the suburbs and buy a flat, or buy a house in the townships.
“The house I bought in Khayelitsha is in my mom’s street, six houses from where I grew up, which means it comes with family support. “Khayelitsha is a fairly new township. In the late 1980s and early 1990s the government began building subsidised houses for teachers, police officers and others. My mom bought here in 1991.”
Mzilikazi obtained her home from a family friend “who I grew up in front of”. “I bought the house without an agent – it was a private sale. The house was not on the market, but I had inside information that the owner was going through a divorce and wanted to sell. We spoke and agreed on a price.
“I went to all the banks to apply for a bond and chose the one with the lowest interest rate. The transfer went through in December 2014. I was 34 years old and I felt so grown up.
“The owner had an attorney who drew up a sales agreement which I took to the bank for my bond application. The bank gave me a lawyer who helped me deal with the title deeds. “I bought the house for R500 000 at the time and today it is worth double that. It has two bedrooms and is a corner house. I have redone a few things, including the kitchen.”
The bonus? “The owner had four flats on the property which I rent out and that covers my bond.”
Mzilikazi married two years ago and has had two more children. “The money I’m saving is going straight into my childrens’ education, which is what I wanted.”
New chapter for journalist in Langa
Journalist Yonela Sinqu, 31, lived in the northern and then southern suburbs for 17 years before deciding to rent in Langa. “My choice was simple. When you rent in townships you often don’t have to go through the financial scrutiny of payslips, bank statements and so on.
“If the landlord knows the person who is bringing you, voila, you get the place. There is often no background check. Sometimes they just like the look of you, and don’t even ask for a reference. “If you are a freelancer, like I am, who doesn’t have a steady monthly income, this system makes your life easier.
“Rents vary dramatically from road to road, or even from house to house in the same street, and landlords ask for what they need, which may not be market-related. “I am enjoying Langa. It is small, quiet, literally 10 minutes from town, very close to Cavendish and Century City and other places I frequent.
“I am just on the other side of Pinelands – just divided by a road and a railway line. I feel comfortable. The rent is at least half that I was paying before, I did not have to pay a deposit, and electricity is included in my rent.
“I am saving a few thousand rand a month by moving to Langa. If I catch a taxi from here to town, it costs me R12. My petrol costs are drastically reduced because of the township’s proximity to everything.
“People have a wrong perception of the townships. Close to where I am is a popular theatre, a market and a stunning coffee shop. Here everyone knows the next person. There is an amazing sense of community, and many are fourth generation residents. I used to work in the community as a reporter and I got to know the people.
“You still find children playing in the streets. It’s how we grew up. People greet you in the street.” Sinqu says it is not easy to find a place to rent as landlords do not use the regular means of advertising, such as online or in the smalls.
It is mostly by word of mouth. Landlords rely on a knock on the door from someone who knows someone they know. I found my home within a day through a friend of a friend.
Buyers beware: Get it in writing
Fernando Antonio provides tips for those trying to buy in townships. Before making an agreement, consider:
Is the seller the owner?
Make sure you meet a conveyancing attorney to help with the deeds search for the property, verification of the authenticity of the title deed, drafting of deed of sale stating when occupation takes place, and always have a paper trail.
Check whether the conveyancing attorney is compliant with the law society. Do they have a trust account for you to deposit money so you can hold them accountable?
Is the property owner the only owner and not married in community of property?
Is he or she in possession of the title deed?
Are the municipal accounts paid up?
Are the electrical and plumbing systems compliant?
Buy through a legitimate estate agency.
Ready for sale: Get all in order
Pointers for sellers: Find out the actual value of your property by going to your municipality or housing department, or from a property professional you trust, because you can be cheated.
Also check the legitimacy of the estate agent and whether they are compliant with the Estate Agency Affairs Board regulations. Understand what buyers are looking for and put emphasis on that.
You know your property better than anyone. Do some repairs on your house so a potential buyer does not negotiate a lower price. Respect contracts. Once you have signed a deed of sale or sole mandate it means you have given the buyer or estate agent the go-ahead to proceed with buying or selling your property.
Be open about bonds. This is the safest for everyone, and remember most people cannot pay in cash. Make sure your municipal bills are fully paid and up to date.
Migrants upscale: Residents move on
The journey to live in a brick-andmortar home is interesting, especially for migrants from the Eastern Cape and for African immigrants, says entrepreneur Fernando Antonio, founder and chief executive of the township property portal ZAkasi.co.za
“When they come to Cape Town the general experience is they live in an informal area in a shack. But when they get a job, they rent a better place in a more formal area, and that is why rentals are big in townships.” Antonio says people in the townships are selling their homes for different reasons, including:
◆Returning to the Eastern Cape for good.
◆Retirees selling their RDP homes to return to their birth homes for the last part of their lives.