2008 may well be the year that the banks re-enter the property market as residential developers – for the first time in decades.
So says Jo Pelser, MD of leading developer Sable Homes, who notes that there is currently much pressure on the financial institutions to facilitate the provision of housing stock at the lower end of the market.
The banks are working on their commitment to lend billions of rands to lower income homebuyers, but there are not enough affordable houses available for them to meet this target – and rising inflation and interest rates, not to mention building costs, are scaring off private developers.
“So in order to get the numbers up, the banks may well decide to re-enter the market themselves as developers in that sector of the market – although they will probably opt mostly for mixed-use projects where the commercial element carries the residential.”
Meanwhile, says Pelser, those buying new homes now need to check out their developers - and their contracts – very carefully so they don’t end up facing serious problems.
“The market is in an affordability crisis that is negatively affecting demand and at the same time developers are finding it more difficult to get project financing. This creates the risk that projects which appeared to be sound will be cancelled and that off-plan buyers will lose their deposits and/ or time in the market.
“Alternatively, even when projects go ahead, they may proceed very slowly and buyers may end up living on a ‘building site’ for a long period – or living without the communal facilities they were expecting, such as swimming pools, gardens or even security fences.”
As to the prospects for the development sector, Pelser believes things will improve by 2009.
“Lack of stock in the rental market and high demand are driving rentals up and this will eventually give rise to a situation where it is once again cheaper to buy than to rent. In the meantime, there is lots of infrastructure delivery on the cards that will enable the provision of affordable units in infill developments close to workplaces, which is where buyers want to be to avoid ever-increasing traffic congestion.
“And together, these factors will help to create a more positive environment for developers.”