Why location is important for property investors

Why location is important for property investors

Private Property South Africa

Whether it's commercial or residential property, the experts all agree that location is one of the most important aspects.

Regardless of whether a property professional works with residential or commercial property, all will agree on one aspect, and that is that location is one of the most important aspects to consider when purchasing a property. Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that property experts emphasise the importance of location because it has such a massive bearing on a property’s potential investment return. He notes that location refers to several aspects that potential homebuyers need to consider before they make their final decision and sign an offer to purchase. There are various factors that influence whether a particular location would be considered to be ‘good’ or ‘bad’. “The more positive elements that a location has going for it, the greater the potential resale value the property will have over the long term. Essentially it comes down to desirability and whether buyers would want to live where the home is situated - demand directly influences price,” says Goslett.

Many buyers focus on the home itself and compromise on its location, however in terms of the appreciation potential of the property this will end up hurting their back pocket. It is always better to put location as a top priority and rather compromise on the property. While it is impossible to change a property’s location, the home can be renovated or changed to meet the owner’s needs.

According to Goslett a good location is where there is the potential for growth and development. The area needs to be able to support the demand for property over the long term and subsequently increase the value of the property in time. However, it is important to bear in mind that certain development can bring down the value of a property, such as the construction of a power plant or dump within proximity to the home. “Before purchasing in an area buyers should find out about the future development plans of an area. Developments such as new industrial sites, new roads or railways or even industrial activities can vastly alter the price profile of an area,” he warns.

Commercial activity and corporate investment in an area is also indication that an area has the potential for strong investment returns. Goslett says before a national retailer or property developer invests in an area, they will undertake thorough market research to determine the area’s potential. The presence of residential and commercial property development, along with long-established or well-known brands within the surrounds will indicate that there is a level of confidence that the area has good growth potential,” advises Goslett.

The infrastructure of an area will also have an impact on the value of the properties located there. “There needs to be provisions made to ensure that the infrastructure in an area can accommodate the level of service required by its residents. Neglected areas that experience poor service delivery are not a good option. It is fairly easy to distinguish these areas based on the upkeep of the general public land such as the parks, pavements and roads,” says Goslett.

Proximity to quality amenities which include shopping and medical facilities, entertainment areas, restaurants, public services and schools is also another factor to consider when determining the perfect location. “Convenience is a highly valued commodity,” says Goslett.

He adds that crime is another aspect that potential buyers should take into account. Homes in an area with a high crime rate will not hold their value over time. Goslett says that potential buyers will be able to find out about the crime rate in an area by contacting the local residents association, speaking to potential neighbours or consulting with the security companies that service the area. “Driving through an area during different times of the day could indicate either unpleasant or welcome conditions. The different times could bring about a variety of elements such as how severe the traffic is during peak times or how lively and noisy the night life is,” says Goslett.

Accessibility to transport routes can also have an impact on an area’s appreciation potential. Many South Africans have to commute relatively far distances to where they work every day, which has pushed up demand for property with easy access to major transport routes and modes of transportation such as the Gautrain or bus stations. “There is a fine balance to consider when selecting a property within proximity to major transport routes. It is important to be within range, however being too close could expose the property to a significant amount of noise and have a negative impact on the home’s value,” adds Goslett. “The adage of location, location, location was first used in 1926, and is as relevant now as it was then. While finding the right home in the right location will require time and research, the future benefits of solid growth in the value of the property will certainly make it worthwhile,” Goslett concludes.

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