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Mixed-use precincts remain a sound investment option, with interest rates at lowest levels in five decades

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Property trends prior to the nationwide lockdown showed investor sentiment shifting towards mixed-use precincts as offering greater value than large, stand-alone houses in South Africa’s property market.

Living and overhead costs associated with stand-alone properties have continued to rise, tipping the scales for many South Africans towards downsizing to more centrally located residences. Added to this, an increase in residential rental demand has seen mixed-use precinct residential units becoming the most potentially lucrative buy-to-let choice for the savvy investor.

Managing Director of Amdec Property Developments, Guy Gordon, believes that rental demand within the mixed-use sector is only likely to accelerate in the current climate.

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Although market fluctuations and perceived volatility may keep some investors on the fence for the foreseeable future, investing in bricks and mortar remains a go-to safe haven asset class, for a notably more stable return. In addition, government’s move to ease the nationwide lockdown to Level 3 at the start of this month, will have come as welcome relief for countless business and industry sectors in South Africa, as the economy gradually begins to reopen.

The South African Reserve Bank’s reduction of the repo rate by an additional 50 basis points in May, from 4.25% to 3.75%, saw the prime lending rate fall from 7.75% to 7.25%.  This is the lowest that it’s been in close on 50 years, and serves as an exceptional catalyst for property investment. While lending rate cuts provide a great deal of relief for existing homeowners in the current climate, they also present a sterling opportunity for those who are weathering the economic storm with capital to spare.

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“Now, more than ever, the discerning investor should be focusing on the basic fundamentals of property investment”, says Gordon. “The Covid-19 crisis has emphasised the importance of location, accessibility and convenience in the investment equation, coupled with the need for professionally managed properties where safety, security, cleanliness and hygiene are paramount. This is where mixed-use precincts like Melrose Arch come strongly to the fore, representing an unparalleled value proposition for tenants and investors alike, providing for arguably the best option for occupational peace of mind and reliable investment returns”.

The Melrose Arch mixed-use precinct in Johannesburg has long been defined as the ultimate New Urban mode in which to live, work and play. 

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Prior to lockdown, this iconic development was recognised for delivering long-term capital growth and rental returns that were amongst the highest in Johannesburg. Its proven desirability was further exemplified during the height of the national lockdown, with residents enjoying all the benefits of living, and being able to exercise within an enclosed, access controlled, fully secured, sanitised environment.

The convenience of having all daily amenities within walking distance of one’s home, within a safe and secure environment, certainly makes for a desirable quality of life and enduring sense of well-being, but Gordon adds that professional proactive property management, now more than ever, will be a key differentiator for investors and tenants looking for financial peace of mind going forward.

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Gordon continues, “When the lockdown was announced towards the end of March, we rapidly introduced physical distancing and sanitisation protocols, in line with Government and World Health Organization’s guidance, to protect our residents at One on Whiteley. Consequently, we received a great deal of positive feedback from residents whose quality of life has been comfortably preserved despite the intense lockdown restrictions. The ability to walk within the protected boundaries of Melrose Arch, meant that residents could easily obtain groceries, pharmaceutical supplies and all other essentials without having to get in their car or leave their pristine mixed-use environment.”

Despite lockdown restrictions gradually tapering off, investor preference will continue to favour developers and property managers who implement appropriate physical distancing, sanitisation, and non-touch technologies as standard, given that global health experts have cautioned that Covid-19 prevention measures are likely to be necessary for years to come.

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There are moves afoot at One on Whiteley in Melrose Arch, and at the Amdec Group’s Harbour Arch development, currently under construction in Cape Town, to introduce contactless palm-swipe technology to operate doors and access-controlled areas, along with self-cleaning elevators, and facial and number plate recognition. Gordon argues that such additions are indispensable in ensuring the safety of residents, and something that investors need to be cognisant of before signing on the dotted line.

“The health and safety of our residents comes first, above all else, and will come under increasing scrutiny as time goes on. The Covid-19 crisis is reshaping the way people choose to live, so buyers and tenants need to be far more discerning before committing to a lease or bond. Mixed-use developments such as One on Whiteley and Harbour Arch represent the pinnacle of convenient, contemporary modern living, making them an extremely attractive proposition for savvy investors looking to take advantage of the lowered interest rates and favorable lending conditions”, Gordon concludes.

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