|Other features such as security, location and capital growth, will also feature, but only as sub-headings to that of affordability, according to Rudi Botha, CEO of mortgage orignator, BetterBond, who believes the delivery mix of new developments will ultimately dictate the type of market conditions for this year. |
With the chances apparently receding further of an interest rate increase this year and banks such as Absa discounting the possibility, Botha says the pricing mix of new developments will play a significant role in governing buying and selling patterns. His assumption is based on homeloans remaining readily available.
The ultimate key in the process, in his view, is that of developers meeting lower end market needs, which Botha concedes will be a huge challenge in the face of growing raw land shortages and the surge in building costs. Both, he adds, are critical to the affordability component of new product and allow little manoeuvrability among current trends.
“Obviously, developers must look toward cheaper raw land, such as that on the periphery of towns or less popular areas, but even then the cost savings could be limited and offset by purchasers not wanting to relocate too far from work.”
Botha believes a short-term answer in part is for developers to revert to the highly successful “GASH” (good address, small home) concept of the early nineties when 60 to 75 sqm apartments were spawned by developers in a bid to ease the affordability problem of that time inflicted by the high interest rate scenario. The concept, he points out, was particularly successful in the northern suburbs of Johannesburg with hundreds of units being sold over weekends.
But, more favoured by the homeloan expert is a concentration on higher density, “perhaps in the form of six to ten storey apartment blocks, well located, of good design and incorporation of green and leisure space.”
Botha, who has just returned from studying high density living in Mexico, believes South Africa suburban dwellers will be forced, because of affordability, into higher density living within the next five years. “Even cluster and townhouse options will only be affordable to the middle and upper classes.”
In major Mexican cities high density has long been a successful contributor in easing housing bottlenecks just as elsewhere in the world and the trend seems to be picking up the pace in Britain now. The proportion of new development in the UK now accounted for by apartments has doubled since the turn of the Millennium, according to new British government housing statistics. Botha says that the number of flats built as a proportion of all new properties increased from 20% in 2000/01 to 41% in 2004/05.
Under utilised CBD commercial buildings in South African cities he sees offering excellent scope for high density development, but top-end pricing, such as that being sought in some loft conversions will not help the situation.
And here he believes developers could be encouraged by government through proportional tax incentives based on location and size of units and a definite speeding up in local authority approval and delivery of basic infrastructure such as roads and schools.