Newly-launched luxury apartment developments across SA have recorded a spike in off-plan sales in recent months – with some already being sold out.
The sales that have been reported by industry players have largely been in mixed-use nodes where potential buyers can live, work and play. Property developers are back in business after the 2007/8 global financial crisis, which saw a five-year-long slump in development activity.
Buyers are seemingly now confident to bet on residential property as a hedge against market volatility and the worrying state of the domestic economy, says Nicholas Stopforth, joint MD of Amdec Property Developments. “Also, investor confidence towards SA has improved and has benefited the residential market,” he says.
Amdec and Pam Golding Properties in July last year launched a luxury apartment development in Melrose Arch in Johannesburg called One on Whiteley, adding to its three established apartment buildings in the swanky precinct.
Stopforth says 60% of the 120 one- and two-bedroom apartments that have been released to the market have already been sold at prices from R1.8 million to R6.7 million. The pricing on apartments on average translates to about R50 000/square metre – which is three times more than the first apartment scheme Amdec launched at Melrose Arch back in 2005 at R15 000/square metre.
“January and February have been quiet in terms of sales. But sales have been good from March, as we have had about 40 sales in the last two months,” he explains. The development, which also offers 23 penthouses, is expected to be completed in 2018.
Stopforth says the capital appreciation in Melrose Arch’s apartment schemes has been strong over the past ten years as “the precinct sells a lifestyle with the retail and office space on offer proving that mixed-use spaces still work”.
A number of other top-end apartment developments are selling off plan between R20 000/square metre to R47 000/square metre which include Renprop’s The Vantage and The Tyrwhitt (in partnership with Grapnel Property Group) in Rosebank and The Houghton in Houghton, where apartments and penthouses are on offer. In Sandton apartment valuations are pitched up to R55 000/square metre at Metropolis on Park, Central Square, Embassy Towers and Capital on the Park.
Another market seeing a surge in apartment sales is Cape Town. The demand for apartment units in the city’s urban market at the height of the global financial crisis sunk by 12% and sales volumes also declined from 70 000 sales/month to 12 000 sales/month, says Jacques van Embden, MD of Blok, which develops apartments in the Atlantic Seaboard and City Bowl.
But the residential market has staged a turnaround and underscoring this is that Blok’s first development for 2016 called NINEONS – which was launched in March boasting 23 apartments in Green Point – is nearly sold out. The scheme, which is expected to be completed in two years and offers one- and two-bedroom apartments priced from R2.5 million has already seen 21 sales. “Apartment living used to be seen as a downgrade, but this has changed as there are now a lot of investments into the city,” says Van Embden. Blok has another six apartment schemes across Green Point, Bantry Bay, Fresnaye and Sea Point which are mostly sold out.
When the company launched its first scheme in 2014, apartment valuations in Cape Town were between R25 000/square metre and R35 000/square metre. But latest schemes launched in the market are fetching a cool R40 000 to R85 000/square metre. Says Van Embden: “The demand for apartments is driven largely by South African buyers while foreign buyers make about 5%.”
In proximity to the V&A Waterfront, Amdec is planning a R1.2 billion worth mixed-use development called The Yacht Club, boasting 170 apartment units, office space and a 160-key hotel. Stopforth says 130 apartments have been sold with about two years remaining for the development to be completed.
Apartments at The Yacht Club range from R2.4 million for a one-bedroom unit up to R4.5 million for a two-bedroom unit. On a rand per square metre, this translates to R45 000 to R54 000.
Durban’s north coast is also courting the attention of cash-flush buyers with areas like La Lucia, Umhlanga, Sibaya, Umdloti and Ballito seeing strong demand for properties, says Carol Reynolds, Pam Golding Properties area principal for Durban Coastal.
“The move of the airport [King Shaka International Airport] to the north coast has resulted in increased demand from Johannesburg commuters wishing to relocate their families to the KZN coast… Perhaps the three factors that drive demand the most are: position, security and convenience, and Umhlanga and Sibaya offer all three,” says Reynolds.
Umhlanga and Durban North are regarded as the best address on the coast and have held their value over the years. Pam Golding is involved in the marketing of apartment schemes which are selling between R25 000/square metre up to R40 000/ square metre, which includes the Gateway area’s Le Boulevard and the recently sold out The Zen, and Prestige at Izinga Park.
Industry players have raised concerns about the oversupply of apartments in Umhlanga, which is believed to have reached a tipping point. However, the area has posted strong apartment valuations, with Reynolds saying that apartments were selling on average for R15 000/square metre five years ago and now fetch R25 000/square metre. Others apartment schemes have commanded prices of up to R60 000/square metre.