The best paying tenants are aged 50 years and older. This is according to rental collection platform, PayProp, which controls the lion’s share of residential letting-related transactions in South Africa, processing monthly rental receipts and beneficiary settlements for more than 95,000 properties nationwide.
This, coupled with a very high demand and limited supply, makes retirement property one of the best and least risky options for investors. But with only a few retirement developments allowing full ownership and investors of any age to buy into it, finding these investment gems are not always that easy. When you do find a retirement development which allows anyone from the age of 18 to buy a unit and let it to tenants aged 50 years and older, this is one of the best property investments you can make.
“There is an insatiable demand for secure, well-managed retirement solutions offering full ownership and on-site frail-care facilities guaranteed to be operational from phase 1,” says Gerrit Brandow, Director of Central Developments, which boasts a retirement portfolio of 11 developments, comprising over 4 600 units. “Our retirement estates offer all this as well as a lifestyle centre with various amenities such as a dining room, recreation hall for various social activities, hair and beauty salon, doctors’ consulting rooms, library and more. These estates are also expertly managed and have quality finishes, green architecture, fibre internet connectivity and state of the art security. This makes our product the best offering in the market, increasing demand and as such they are very attractive to investors, who benefit from a strong yield on rental income and continued capital growth.”
According to PayProp’s numbers some 39% of 50+ tenants rent for between R7 500 and R15 000+ per month. Therefore a development such as Celebration Retirement Estate opposite Northgate Mall in Johannesburg, where units are priced from R810 000 putting rentals in this price bracket, can offer investors returns on investment of up to 20% per annum from the first year.
This is significant because as a whole, the South African property market is growing at a nominal rate (excluding inflation) of 4% year-on-year. FNB household and property sector strategist, John Loos, reported that in Q2 2017 the Johannesburg housing market was growing at a nominal rate of 3.2% year-on-year (or at -1.8% in real terms).
“When we consider their above-average credit scores, debt levels and debt-to-income ratio, we can deduce that over 50s are on average better with debt management than younger generations. They pay on time, are less reliant on short-term loans (bad debt) and have fewer delinquencies and judgements against their name. They also go for longer periods without going more than 90 days into arrears on any credit accounts (not rent), which is also an early indicator that your tenant is experiencing financial difficulties and could in future default in part or in full on their rental commitments.” says Johette Smuts, head of data and analytics at PayProp.
Serious investors of all ages, who are either just starting out or would like to diversify their property portfolios, would therefore do well to consider buying into a well-planned, well-managed retirement development such as Celebration Retirement Estate. Due to the high demand and limited supply of this calibre retirement property – clearly evident in the 100 units sold at Celebration within the first 14 days – these properties also resell three times faster than other residential property.
“Investors of any age can invest in Celebration Retirement Estate,” says Gerrit Brandow. “Many return investors have faith in our developments because they have already reaped the benefits of their previous investments in our products.”