de Waterkant as a case study.

CAPE TOWN - A Realestateweb Community member bought a "very expensive" one bedroom loft apartment on the edge of De Waterkant in 2007 as a holiday rental investment. When interest rates started rising she found it difficult to rent out to cover the bond. Currently her rental covers the bond but she is considering selling to free up some cash. She is not sure whether she should hang on or sell and try and get her money back and then try purchase a bank repo which she can fix up and sell on, without getting a big bond again.

She asks, "What sort of trends are you expecting for that area in Cape Town over the next year or so and what would your advice be?

I asked some property experts their opinion.

Gavin Wright, principal of Leapfrog City Bowl & Atlantic Seaboard, with an office in the heart of de Waterkant Village, says it first of all depends on where the property is.

"There is de Waterkant and de Waterkant. Depending on where the property is (above or below Somerset road) and its proximity to clubs, restaurants and shops can affect the holiday rental dramatically as well as long-term rentals. Proximity to the city is also a factor; properties outside of the real "de Waterkant Village" are often not viewed as de Waterkant even though they may have been advertised as such - holiday makers like to be within the Village. Parking is also an issue for longer term rentals."

He believes the market will continue to grow as it has been - slowly but steadily. "We do not foresee any "big jumps" in the next 18 - 24 months." He stipulated that bank repos are not likely to come up within the de Waterkant area and often are not in great condition. The costs of purchasing, fixing and then selling often do not make these ‘investment ventures' a great return."

Alon Kowen, founding partner and ex-MD of Auction Alliance and now property investor gave his opinion. First of all he says Realestateweb Community member bought in 2007 which is referred to as "the peak in the residential real estate market". Values have not increased materially since 2007 and taking inflation into account the Realestateweb Community member 's investment has not done well. While the area hasn't gained materially in value since 2007, prices are stable in the area. In a falling market areas like de Waterkant are slow to depreciate and recover faster in a strong market". He also mentioned that very few residential purchasers will be able to cover their bond with the rental in the first year.

Kowen says that even though her rental is covering her bond it might not be covering the additional costs associated with owning a property. Maintenance, rates and taxes, levies, commissions if applicable all add up and need to be taken into account, as must all costs associated with selling and buying. "Before making any decision the owner must consider the costs associated with exiting the investment (agent's commission, capital gains tax, cancellation of bond and other applicable costs) as well as the costs of re-entering the investment market such as transfer duty, transfer costs and additional costs and time associated with settling a new tenant. Kowen concludes that the REW Community member should stick with her investment for another 24 months and make a more informed decision then.

Rael Levitt, CEO of the Alliance Group commented,"We expect the CBD market to be quite flat this year and the seller may struggle to get her money back at the top of the market. I suggest that they quietly try and sell and if they can't rather hold for a while. Repos are not in great areas and are not enormous bargains."

The general consensus seems to be that now is not a great time to sell. Most investments take a good few years to materialise a real profit and buying when the market peaks doesn't help.