Johannesburg primed for new developments in 2016

When it comes to launching new residential developments, the past 12 to 18 months have been the busiest.

This is according to Chris Renecle, MD of Renprop, who says during this time they successfully brought around 11 new sectional title developments equating close on 1 700 units to market in the northern Johannesburg suburbs.

He says the recent developments launched were tailored in response to the level of investor demand that the market has shown, guaranteeing success.

Added to this, Renecle says many investors have benefited from marked capital growth during the launch-to-completion cycle of many of these developments, which has added to the investment appeal of off-plan residential apartments this year.

A prime example of this would be The Tyrwhitt in Rosebank.

“Investors were attracted by the phenomenal capital growth that units at The Vantage, one of our previous developments in Rosebank, had achieved. Added to this, apartments at The Tyrwhitt were redesigned to accommodate the demand for smaller, better priced units, based on the feedback we had from investors,” says Renecle.

One of the other prominent developments launched this year was The Beacon in Illovo. The Beacon is set to be a landmark, 20-storey apartment building that will reshape the Illovo skyline.

“Judging by the fact that approximately half of the 240 apartments at The Beacon were sold out at the launch function, it is clear that there is a pent-up demand for these kinds of apartments in the area,” says Renecle.

He says aside from the appealing capital growth prospects that these kinds of off-plan apartments present, the demand for sectional title property in northern Johannesburg has been further fuelled by a strong rental market.

“The rental market is expected to continue to show strong demand in the year ahead for a number of reasons, primarily due to a lack of affordability, meaning many would-be homeowners will have to continue renting, as well as the continued migratory patterns we are seeing throughout the African continent giving rise to the need for additional rental accommodation.”

While Renecle anticipates that the next 12 months will continue to reflect a similar level of demand from investors for sectional title residential property, he does think that the rate of development may slow down somewhat.

“This will be as a direct result of constrained home loan finance,” he says.

Renecle says even though there is strong demand for residential property, actual property sales in new developments over the past 18 months have not matched the levels seen during the mid-2000s.

“This is due to the fact that the appetite for property purchases has been hampered by investors’ inability to access the required finance.”

The lack of availability of 100% home loans, along with the financial institutions’ general reluctance to grant finance to investors who are looking to expand their property portfolios during 2015, will undoubtedly continue into next year.

He says, in fact, the access to finance for investors may even worsen in the near future as the South African economy continues to retract.

Renecle says this year there have been a number of cash investors, which gives a clear indication of the level of demand. He anticipates cash investors to dominate the off-plan investment market during 2016.

He says for those on the lookout for sound sectional title apartment investments to add to their portfolio, they have plans in place to launch a number of residential developments in the year ahead in the prime northern Johannesburg areas of Rosebank, Rivonia, Bryanston, Morningside and Ferndale.