Farmland too expensive to take to market

Stuart Ferguson - warns farmers of scarecrow prices
KwaZulu-Natal’s coastal farmers face drought conditions next year in terms of selling off their land to “get-rich quick” residential property developers.

New development marketing expert Stuart Ferguson of Key Projects says in a Durban interview that market forces will increasingly drive farmers back to working, rather than selling their land. However, the demand for raw land will remain strong, but only at prices most farmers would consider scarecrow prices after six fold increases in the past two years

Prices for new development land may be a little kinder to south coastal land owners, but even then surging building costs, will hobble the generosity of developers forced into meeting changing markets.
Ferguson, one of a two-member sales team that posted more than R600 million sales in developments at the Point this year, sees, against the backdrop of tapering speculator activity, substantial adjustments that developers will be forced into in the new year.

Chief among these is their delivery concentration on the R400 000 to R800 000 price range, if risk is to be minimised; specific targeting at end user rather than investor purchasing; and their ultimate dependence on sourcing well priced and well located land.

Demand will continue to be governed by affordability, but not necessarily in the lower price range of R400 000 to R700 000, which he says is BEE flush with middle management and young executives financially out of reach of freestanding homes. Their focus will be strong on a desire to live, as close to work as possible so projects near to new commercial nodes, such as the Gateways Precinct, the north coast in anticipation of the King Shaka Airport and the general Durban area should find ready buyers. But, pricing is paramount and here, he believes, higher densification of new building will have to play a meaningful role.

“Higher density has been the global solution to high land costs and developers will have little choice, but to turn to multiple storey developments.” However, he sees this being executed with general sensitivity, in dedicated estates and given the full support of local authorities.

Ferguson expects the buy-to-let market to remain strong next year with purchases based on “decent” returns and determined ultimately by comparative investment opportunities. One niche market that excites him, and he expects to grow, is that of expatriate purchasing.

Some three percent of Key Projects sales in the past year have been to either expatriates or those about to embark on overseas contract work armed with brand new degrees. Typically, expatriate purchases have involved large deposits and geared around the buyer’s intention of returning to South Africa, in most instances, in the countdown to the World Soccer Cup 2010 with the purpose of starting their own business. With few exceptions the main motivation, although based often on strong family pull, is lifestyle driven.

Ferguson says as a result of these sales and exposure to overseas referrals from expatriate buyers, Key Projects is budgeting for six percent of total sales being made to current SA exiles.
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