Durban’s CBD first steps toward residential rejuvenation

It’s being trumpeted as the “place to play for investors” by Nedbank finance expert Richard Thomas and broadcast as “possibly the next place that savvy investors should be casting their eyes” by Barak Geffen, chief of Sotheby’s, one of the country’s largest real estate groups.

Durban’s Central Business District (CBD), while still problematic in terms of some buildings falling into a state of disrepair or rates and taxes delinquency by owners, is nevertheless identified by investment experts as offering excellent buy-to-let long-term prospects underpinned by expert belief that rentals will double in the next three to five years.

Conviction for such faith centers mainly around the city’s excellent infrastructure and job opportunity particularly for workers keen to cut their dependence on the high cost of public transport and growing travelling times. It’s investment prospects are not a new phenomenon having become a popular buy-to-let magnet for Moslem and white investors for some time and more recently investors from African countries, but a further interest surge in the area is expected following the recent announcement of a planned three-phase 15-storey 265-unit residential block, with four penthouses, destined for 33 St George Street (see left). Gareth Went of developers Imperial Crown Trading, reports a 35 percent sales ratio since launch with buyer interest equally mixed between owner-occupier and investor.

Aptly named Renaissance with a starting price of R335 000 for a 36 sqm apartment, the building is being seen as pioneering the first step toward regeneration of the area. Went, while guarded in disclosing other earmarked sites for possible development is hopeful that Renaissance is the first of many by his company.

Both Thomas and Geffen believe it’s only a matter of time before Durban’s CBD emulates the rejuvenation of its sister equivalents in Cape Town and Johannesburg, both of which are on the cusp of regeneration. Local prominent estate agent Neil Swartz believes Renaissance could supply an early catalyst for more redevelopment especially of the mixed-use concept incorporating retail, residential and commercial being mightily favoured in other CBDs.

Demand from both investor and owner-occupier remains exceptionally strong throughout the CBD, according to Swartz and Maureen Bougardt of estate agency 031 Property up to R300 000, but turnover is being seriously dampened by overpricing. Greatest demand is for homes in the more affordable Albert Park where one-bed units of R260 000 are sold literally within hours of listing according to Maureen. Two bed apartments sell for around R450 000.

Both Swartz and Bougardt report serious unremitting investor interest. Swartz is servicing several investors having acquired local portfolios of 20 to 24 units often involving blocks experiencing levy collection problems, which they quickly put right, often upgrade and let. Bougardt compliments investors for their rejuvenation of St Andrews Street. “Five years ago about 50 percent of the flats in the area were in trouble, but not anymore.”

Bob Fraser of CBD-based Cor-Pro, also confirms the intensity of demand below R300 000 and resistance to overpricing, which is more a question of affordability ruling out negotiation on price. It was still too early to gauge the effects of the June 1 National Credit Act on the market.

Figures released by PropValues for CBD and South Beach this week reflect an average selling price of R445 354 for the combined area in the period January to May this year compared to R393 931 for the same period of last year. Number of units sold totaled 192 compared to 80 units last year while the number of days listed remained fairly static at around 55 days.

Average selling price of homes below R300 000 PropValues sets at R215 847 for the first five months of 2007 compared to R200 847 for the same period of last year, while number of units sold were higher at 63 compared to 51 for last year.

Commenting on the region’s slowdown in price growth, Swartz attributes the softening of prices to three years of excellent growth and reducing buyer affordability.
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