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DEVELOPMENT: Signs Of Recovery In Development Market

 



Recent Western Cape Business News

There are a few early signs of recovery in the development market, after this sector’s enduring a particularly difficult time over the past 18 months.  So says Pam Golding Properties’ MD for the Western Cape metro region, Laurie Wener – but, she cautions, there is still a long way to go.

The recession took its toll on developments, especially in the off-plan purchase category, which constitutes the majority of its sales,” says Wener.  “One of the main advantages to buying off-plan is that, in a steadily growing market, one benefits from the buy-now-pay-later principle, where buyers pay a 10 percent deposit and the balance on transfer at completion - by which time the property would have already grown in value.  But of course with the market in a negative phase, this benefit was lost, and with it a significant proportion of the appetite for off-plan purchasers.  In addition to this, the introduction of the National Credit Act made it substantially more difficult for buyers to acquire finance for off-plan purchases in particular.  These two factors removed the largest segment of off-plan buyers from the market, namely those purchasing as investors and speculators.  In addition to this, the softened prices of existing properties offered better value than a potential new build.”

In the face of this drop-off in interest, many developers put projects on hold.  But the good news, says Wener, is that some of them are showing signs of interest in re-entering the market.  “There has been a definite shift in sentiment,” she says.  “It is still early days, but we see signs of activity in this market again, and are talking to several developers who are keen to get moving on new projects.”

Wener says there were some developers who continued to operate through the recession to complete projects, taking the risk despite the reduced buyer appetite and relying on sales to end-users once the project was complete.  “This has to some extent succeeded,” she says, “and will continue to do so as mortgage finance becomes more available.  Thus we are seeing steady movement in completed developments, both in terms of sales from the developer, and in respect of re-sales to end-users and investors.  This trend has been noted at several of the completed and nearly-completed developments which PGP is marketing, such as The Quadrant and MontClare Place in Claremont, The Orangerie in Gardens, and The Majestic Village in Kalk Bay.” 


 
 
 
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