Strong development trend to continue into 2016

When it comes to launching new residential developments, Chris Renecle, MD of Renprop, reports that the past 12 to 18 months have been the busiest for Renprop in the history of the company. 

During this time, Renprop has successfully brought around 11 new sectional title developments equating to close on 1 700 units to market in the northern Johannesburg suburbs. Renecle expects a healthy level of new residential development to continue well into the New Year.

He notes that the recent developments launched by Renprop have been successful as they were tailored in response to the level of investor demand that the market has shown. Added to this, Renecle also points out that many investors have benefited from marked capital growth during the launch-to-completion cycle of many of these developments, which has added to the investment appeal of off-plan residential apartments this year.

A prime example of this would be The Tyrwhitt in Rosebank. “Investors were attracted by the phenomenal capital growth that units at The Vantage, one of our previous developments in Rosebank, had achieved. Added to this, apartments at The Tyrwhitt were redesigned to accommodate the demand for smaller, better priced units, based on the feedback we had from investors,” says Renecle.

One of the other prominent developments launched by Renprop this year was The Beacon in Illovo. The Beacon is set to be a landmark, 20-storey apartment building that will reshape the Illovo skyline. “Judging by the fact that approximately half of the 240 apartments at The Beacon were sold out at the launch function, it is clear that there is a pent-up demand for these kinds of apartments in the area,” says Renecle.

Aside from the appealing capital growth prospects that these kinds of off-plan apartments present, Renecle believes that the demand for sectional title property in northern Johannesburg has been further fuelled by a strong rental market. “The rental market is expected to continue to show strong demand in the year ahead for a number of reasons, primarily due to a lack of affordability meaning many would-be homeowners will have to continue renting, as well as the continued migratory patterns we are seeing throughout the African continent giving rise to the need for additional rental accommodation.”

While Renecle anticipates that the next 12 months will continue to reflect a similar level of demand from investors for sectional title residential property, he does think that the rate of development may slow down somewhat. “This will be as a direct result of constrained home loan finance,” says Renecle.

He explains that even though there is strong demand for residential property, actual property sales in new developments over the past 18 months have not matched the levels seen during the mid 2000s. “This is due to the fact that the appetite for property purchases has been hampered by investors’ inability to access the required finance.”

Renecle says that the lack of availability of 100% bonds, along with the financial institutions’ general reluctance to grant finance to investors who are looking to expand their property portfolios during 2015, will undoubtedly continue into next year. In fact, he says that the access to finance for investors may possibly even worsen in the near future as the South African economy continues to retract.

That said, Renecle points out that this year there have been a number of cash investors, which gives a clear indication of the level of demand. Renecle anticipates cash investors to dominate the off-plan investment market during 2016.

For those on the lookout for sound sectional title apartment investments to add to their portfolio, Renprop has plans in place to launch a number of residential developments in the year ahead in the prime northern Johannesburg areas of Rosebank, Rivonia, Bryanston, Morningside and Ferndale.

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