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Falling demand hits Sandton’s luxury apartments

Developers have a surplus of high-end apartments on their hands as buyers retreat.
Property developers are feeling the chill from slower luxury apartment sales in Sandton given the worrying state of SA's economy and increasing political uncertainty. Picture: Supplied

It was only four years ago that Africa’s richest square mile became the destination of choice for SA’s major financial firms, sparking the largest commercial property development boom of the decade.

Corporates including Investec, Nedbank, RMB and the JSE were the early movers into Sandton during the 2000s, and several firms have since followed suit.

Sasol, Webber Wentzel, Alexander Forbes, EY, and Bowman Gilfillan have anchored their main offices in Sandton in recent years while Discovery and Old Mutual Emerging Markets will soon pile into the area.

Property developers believe the catalyst for Sandton was the advent of rapid rail system Gautrain in 2010, which unleashed billions of rands in office, retail and residential property developments.

Over the last three years, developers launched high-rise luxury apartments, piggy-backing on the relocation of corporates into the area that would, in theory, create demand from buyers who desired to live closer to work.

However, the story is different today. 

High-end developers are not reaping rewards, as sales of apartments in Sandton have slowed amid falling demand from prospective buyers and investors. “Things have changed dramatically. Savvy investors are sitting on their hands at the moment,” said Kent Gush, MD of Kent Gush Properties.

Gush said SA’s increasing political uncertainty and downgrades of the country’s sovereign credit rating to junk has seen buyers put off their purchasing decisions.

Figures from property company Lightstone confirm this, showing 4 552 sectional title units sold in Sandton during 2016 and only 1 793 so far this year.

Source: Lightstone

Gush said developers are still concluding apartment sales, but not to the scale seen three years ago. “The strength of the luxury apartment market then was being driven by investors who made very good returns on investments into luxury apartments in Sandton.”

At the time, the demand for apartments saw the average asking prices in Sandton at some luxury apartment schemes – including the Michelangelo Towers and Da Vinci on Nelson Mandela Square – fetch between R35 000/square metre and R45 000/square metre. In the early 2000s, apartments prices were achieving an average of between R10 000/square metre and R25 000/square metre.

Gush is involved in four apartment developments in Sandton: Katherine & West, which is located diagonally across from the Gautrain station; Metropolis on Park, located near the Mushroom Farm Park; Central Square in Morningside; and Embassy Towers, nestled a block away from Sandton City.

Katherine & West, which boasts two- and three-bedroom apartments ranging in price from R9.5 million to R26 million, is sold out. Gush said another three apartment schemes, priced between R1.9 million and R40 million, are more than 70% sold.

Another problem for high-end developers is faltering off-plan apartment sales.  

Marc Wachsberger, ‎MD at The Capital Hotel Group, which manages hotel and luxury apartment buildings The Capital 20 West and Empire in Sandton, said off-plan apartment sales have “ground to a halt”. “Sellers have to adjust their pricing of apartments to the new reality. Developers who change the price to reflect the difficult market will likely be able to sell.”

Wachsberger said buyers still have an appetite for two- or three-bedroom apartment units that are priced below R3 million.

Slower sales are not only unique to Sandton, as developers are also left squeezed in the neighbouring Melrose Arch.

Amdec Property Development has broken ground on a luxury apartment development at Melrose Arch called One on Whiteley, with one- and two-bedroom apartments that are sold off-plan from R2.2 million to R6 million. One on Whiteley, which is expected to be completed in 2018, is already 70% sold. Nicholas Stopforth, MD at Amdec, said monthly sales at One on Whitely have been slower in recent months.

Cape Town, however, appears to be bucking the Johannesburg slump, with property developers reporting higher demand and sky-high apartment valuations.

Read: SA property market: Where dreams come to die

When Amdec launched 170 one- and two-bedroom apartments at its mixed-use development called the Yacht Club near the V&A Waterfront in September 2015, the average asking price was R50 000/square metre. Stopforth said by July 2016, Amdec had sold a top apartment for R75 000/square metre.

The Yacht Club, which will be completed in 2018, is already sold out. Stopforth said the on-going “semigration” trend of property buyers from Johannesburg and Durban relocating to Cape Town is fueling the acceleration in apartment valuations.

Rosebank shines

There are still pockets of growth in Gauteng – one of them – the trendy node of Rosebank. In fact, the area is increasingly expected to overtake neighbouring Sandton as the most desirable live, work and play node.

Just like Sandton, the presence of the Gautrain station since 2011 is viewed to be the catalyst for the area’s rejuvenation. The relocation of corporates into Rosebank including BP, Coca-Cola, Sappi, Standard Bank and others is expected to have a positive-spinoff for the area’s residential market.

More than 500 apartments have been delivered in Rosebank over the last four years. Property developer Renprop has added three apartment developments in the area, among them, the recently completed and sold out The Vantage, which is located on Bath Avenue.

Renprop MD Chris Renecle said The Vantage has achieved an average R29 000/square metre and recent apartment resales have fetched R35 000/square metre.

See below how apartment valuations compare in Sandton and Rosebank

Aparment scheme Area Average price per square metre
Rosebank no 12  Rosebank R29 000
The Caversham  Rosebank R29 000
The Vantage  Rosebank R35 000
The Tyrwhitt  Rosebank R35 000
Central Square  Sandton R40 000
Metropolis on Park  Sandton R40 000
The Capitall on Park  Sandton R40 000
Park Central  Sandton R41 000
The Median  Rosebank R43 000
Beacon Towers Illovo R44 000
Sandton Skye  Sandton R46 000
Embassy Towers  Sandton R46 500

Source: Moneyweb

Renprop has two other pending apartment developments in Rosebank: The Median, opposite The Zone@Rosebank, and The Tyrwhitt, on the corner of Bath and Tyrwhitt Avenue. The Tyrwhitt and The Vantage are in partnership with property development company Grapnel Property Group.

Renecle said 88 of the 120 apartments at The Median have already been sold while 140 of the 200 apartments at The Tyrwhitt have been sold. “Rosebank is achieving seven to eight sales per month. There has definitely been a slowdown but not to the extent of Sandton.”

Asked what makes Rosebank the exception, Renecle said the node is desirable for being in walking distance to private and public schools, the Gautrain, entertainment spots and areas of work.

On Sandton’s prospects, Gush said: “Sandton will have its day in the sun again. At the moment, it’s undervalued compared with the prices achieved in Cape Town.”

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Eish – it has also always been my view that the white-collar crime rate dropped dramatically when all these financial institutions (stockbrokers, insurance companies, banks, mining houses etc.) and attorneys moved out of the old Johannesburg City Centre.

Sadly though, that wasn’t before ‘’Kebblegate and Investecgate the crime with the biggest quantum (R 38 billion) in South African history was planned and perfected.

I also think that it was extremely ‘’ironical’’ that we had a country standstill on Tuesday during the Parliamentary vote on, Zuptagate, to get rid of him when Investec perfected this crime that I think provided the blueprint for Guptagate, that forced the Randgold minority shareholders to sue the Investec crowd (various publications in the public domain has reference).

Where on earth does the money come from? Green with envy I am.

slaving away for 60-100 hours a week at a corporate job. I wouldn’t be jealous…

Another Doom & Gloom article (in my humble opinion).

I do not believe a bit of it and wonder what its purpose is.

Absolute brainless to spend that kind R6-R23m of money for any luxury apartment in SA. Good luck to them. Cannot image what rates, levies and service costs are going to be.Need their heads read by Asterix Soothsayer.

Well said, with rates, taxes and levies you end up paying “RENT” for your own property.

Renting does also not pay off either, the TAX shares nearly 50% on the profit you make(If you make any), yet you do all the work and the risk is on you also.

A Win Win Win for the TAX man?

Which in turn, your Tax gets used to subsidize the SAA/SABC/Eskom and all incompetent government officials and politicians.

people are lining up to pay R1.7mill for a 35m2 flat in a converted office block on the foreshore in CT!!! LOL!!! wait until that south easter starts blowing!!!!

For me as a sensible (or would like to think so) young individual, the prices asked now a days for property is sickening.

I mean 50 square meters for 1.5 or 1.7 in the suburbs etc, and don’t even get me going when you are looking more to the city region.

And someone please assist me with this conundrum, why does a flat of 50 – 60 square meter cost the same as a house on a 800 – 1000 square meter plot? and to make matter worse the bond on your house will stop but your levy will continue till the end of time?

It is like no body has a perspective on what is a good price for what they are buying yet they flush 3m down the toilet and replace it with a tiny turd which they can live in?

It seems that common sense it not so common after all.

I would also like to know.

Just so much view, convenience and status to fill one up.

Most people do not understand (let alone even know about):

– The law of diminishing marginal returns of utility

Apply this regularly in your life and you will be so much richer personally and financially.

I take my hat off to you if you are in a position in your life to be able to afford buying a 1 bedroom flat for R2 mill!

Which property shares have seen the most growth since 2010?

my bellwether guide to property in sa is hout bay (for obvious reasons). now up to 177 with lots coming on with “reduced to sell” or “must sell today” signs. some people know something

hout bay now up to 182 properties for sale(20/8). nothing selling and more coming on. do a search on the “gems” of upper Kenilworth and Claremont – and one could feel elated or conversely depressed – depending on what side of the fence you on (sorry for the pun). would hate to be trying to sell anything over 9 months – till next winter rains. my own view – stay away from w cape.

Not surprising if you have the Mugabe’s as neighbours?

Properties that are battling to sell need home staging. We seem to understand the principles of optimal marketing in every sector except when it comes to selling our largest assets. In a slow market homes still sell- just less of them. In order to make sure that that sale is your property and not the neighbours you need to maximise the appeal and marketability of your home.

End of comments.





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