How to build a property investment portfolio

Head of Nedbank Affordable Housing Development Finance Division, Manie Annandale describing how to buy investment property, says the demand for inexpensive housing is growing and by 2030 up to 70 percent of the South African population is expected to be living in urban areas. He adds that this is due to the growing middle class who want to buy homes priced under R600 000.

Property-Investment‘’With over 900 000 people annually seeking affordable and social housing and only 25 000 new units becoming available each year, property investments in this sector show HUGE POTENTIAL,’’ says Annandale.


He adds that affordable and social housing pose less of an investment risk for investors looking for below market value properties or distressed properties, rather than higher priced housing, due to the massive demand for suitable housing close to facilities in and around metros.

The shortage of available stock, remarks Annandale is because developers are seldom able to build houses priced  under R300 000 per unit and the Finance-linked Individual Subsidy Programme (FLISP) only subsidises properties under R300 000.

‘’While margins may not be high, the demand for below market value properties is massive,” Annandale comments.

Property investments in the buy-to-let sector is also a good proposition for new investors looking at how to buy investment property as there is a huge demand for centrally situated and affordable  rental properties for  the lower income groups.

Nedbank is a leading role player in funding developers of inexpensive and social housing and regularly partners with over 25 reputable and established developers at key development nodes throughout South Africa. “Nedbank has provided over R570 million in affordable housing funding to date,’’ says Annandale.

He explains that it is not only the developers who are thriving on the back of the huge demand for housing, but the beneficiaries are also  enjoying a better quality of life, thanks to sound housing developments built close to schools, jobs and other facilities.

Annandale says finance models have to match conditions on the ground and need to adapt to changing conditions. ‘’Over the years that Nedbank has been financing these developments, we have learned that the key to funding affordable housing developments is flexibility.’’

He explains that if a developer finds there is considerably more demand for housing than was initially anticipated, the bank may decide to consider increasing the density in the development. Annandale points out that flexibility is also necessary in situations when it emerges that the development model should, for example, move from one based on sales to a rental model.

Annandale advises potential investors wanting to know how to buy investment property is to investigate whether developments meet local needs. “There are some insights, such as whether residents want to live in high density units that need to be taken into consideration when thinking of investing in social housing.’’

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