Renewed interest in development market

After an extended period of slow sales activity, there are fresh signs of growth in Cape Town’s development market.  

Pam Golding Properties reports that while there is by no means a rush of new developments coming to market, there are signs of interest returning, both from developers and purchasers.  This is reflecting in slow but steady sales activity, as well as in the launch of a few new projects.

PGP’s Developments Manager for the Southern Suburbs of Cape Town, Bev Bloch, says there has been a noticeable increase in enquiries from buyers wanting to purchase newly-completed apartments in secure lifestyle developments in her area. “This market is driven to a large extent by parents of students at the University of Cape Town.  We are receiving enquiries particularly from medical, legal and business science students in their second years and upward, some of whom intend living in Cape Town after completing their studies,” she says.  “Their parents want to know that they are living in a safe, clean environment where they can study in peace and quiet, close to campus and reliable transport nodes.  The stereotypical image of a student ‘digs’, over-crowded, dirty and cheaply finished, could not be further from the reality of what these parents want – and are prepared to pay for – for their children. Developments such as The Quadrant in Claremont offer a trendy, healthy environment in a conveniently central location, easily accessible to campus and populated by professional people, both tenants and owners.  The first quarter of the year (2012) has seen our development sales dominated by this market, and we anticipate that there will be a fresh surge of interest during the final quarter and even into January 2013 as the next academic year gets underway.”

The purchase is not just a lifestyle decision for the benefit of offspring – Bloch says buying in a new development can also be a sound investment, particularly amid current market conditions.  “It’s not just a case of buying directly from the developer and saving on transfer duty,” she says.  “Nor is it just about being able to view a finished product before committing to purchase.  It’s also about the long-term prospects for capital gain.  The economic climate of the past few years has resulted in a significant decrease in the number of new developments breaking ground.  We believe that this will ultimately result in a shortage of good accommodation, once the existing apartments available in the market have been sold.  And short supply always drives up prices.  Those who invest now can obtain a one-bedroomed apartment in a brand new development for around R1 million – but if they can hold onto the property for a few years, even after their children have finished studying, there is significant potential for growth on re-sale.  And in the meantime, there is healthy demand for rental units in these buildings, to help finance the investment.  We are already seeing some muted return of investor interest in this market, for these very reasons.”

Newly launched developments attracting end-user and investor attention include The Herschel in Claremont, and for retirees, both the Panorama Palms New Apartments in the Northern Suburbs and The Avenue Retirement Hotel in Fish Hoek.  Another new project is Mayview Square in Wynberg, where prices start from just R395 000.  “These are all well-financed projects by experienced developers, and will offer sought-after lifestyles tailored to their particular markets,” says PGP’s MD for the Western Cape metro region, Laurie Wener.  “Central locations close to commuter routes, shopping centres and entertainment facilities, as well as their modern design, will ensure their appeal.”

Wener says PGP has full confidence that the development market is recovering – but, she cautions, it is still very dependent on banks’ willingness to grant mortgage finance to buyers and the general state of the economy.  “There is also still some way to go before the market for off-plan purchases recovers,” she says.

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