FRONT-LINE PROPERTY VERSUS ONE SET BACK FROM THE BEACH? THAT’S THE QUESTION TO CONSIDER WHEN INVESTING IN PROPERTY IN UMHLANGA, SAYS GARETH BAILEY
The general advice when buying a property is to purchase based on “location, location, location”. While this is good advice, when considering purchasing property in coastal towns such as uMhlanga, how does price growth for front-line properties compare with properties located a few roads back from the beach? Does the cliché apply absolutely in this scenario, or do properties a few roads back hold their own?
From a property investment point of view, conventional wisdom suggests we should always choose front-line properties over those situated away from the beach because they offer the best sea views, easier access to the beach, and the best capital gain prospects due to limited supply.
However, these benefits come at a premium that is unaffordable to many people. Properties set back from the beach are cheaper and can offer different lifestyle aspects – for example, the opportunity to live in a simplex or duplex and have your own garden. But how do these properties perform from a capital growth point of view?
To consider this question, I pulled a deeds office transfer report for the last nine years and compared three popular front-line sectional title schemes – Edge of the Sea, The Oysters, and Seashore – with 10 schemes set back from the beach – including, The Shades, Terra Mare, uMhlanga Terraces, Seaford Park, Costa Do Sol, Palma Nova, to name a few.
The average selling price of front-line units in 2009/2010 was R5,6-million; nine years later this has increased to R7,4- million. Likewise, the average selling price for sectional title units set back from the beach was R1,5-million in 2009/2010 and is now R2,5-million. To reduce the bias caused by unit size, I considered growth in terms of average price per square metre. Front-line properties averaged R26 400 in 2009/2010 and R38 300 in 2018/2019.
Properties set back from the beach averaged R14 000 and R21 400 over the same period respectively. In growth terms, front-line properties experienced 45% growth over the term averaging 5% per annum while their non-front-line counterparts experienced 54% over the term and 6% per annum.
This is quite interesting as it suggests that, while front-line property commands a premium in price, the actual growth rates are very similar. In fact, based on this dataset, growth in properties set back from the beach has outperformed front-line properties by 20% over the nine-year period.
So the cliché “location, location, location” applies more broadly in this case and does not rule absolutely in terms of price growth despite the front-line’s better position.
This presents a good case for investing in uMhlanga properties set back from the beach as they are more affordable and offer great capital growth over time. Many of these properties have little gardens, offer easy access to the promenade and the beach, and allow pets. They can be rented out on a long-term basis or be holiday-let to generate rental income.
Not all schemes permit holiday-letting in terms of their body corporate rules, but some do, and this offers investors flexibility to earn income from the property during the year but to enjoy it themselves from time to time when they are in town. In addition, given the dual investment and lifestyle characteristics of these properties, they present a compelling case for investing now and retiring later.