First published on Moneyweb
The large-scale office developments in Sandton are set to bolster the area’s status as the richest financial hub in Africa, but the residential property market is also expected to benefit from the relocation of corporates.
After five years of zero development, a number of luxury apartments are springing up in Sandton, luring locals as well as buyers from oil-rich African countries.
In the last five years, corporates have been relocating to Sandton as the preferred business address, which has created renewed demand for luxury apartments.
Figures from real estate consultant Jones Lang LaSalle South Africa (JLL) suggest that Sandton’s current office supply amounts to 1.5 million square metres. After the completion of all construction, JLL notes that Sandton’s office supply will increase to 1.9 million square metres over the next four years.
Discovery, Webber Wentzel, Sanlam and Old Mutual Emerging Markets are some of the corporates that have set up offices in Sandton.
Kent Gush, MD of Kent Gush Properties, said the demand for luxury apartments is also fuelled by a new breed of buyers looking to live close to where they work and do business. Gush is responsible for marketing numerous apartment developments including Barrow Properties’ Katherine & West penthouses opposite the Gautrain Station. He said four of the seven duplex penthouses – which retail for between R40 000 to R45 800 per square metre – have been sold.
Near the World Trade Centre on West Road South and Lower Road, Lushaka Investments has launched a mixed-use development called Central Square. Apartments at Central Square are selling for up to R50 000 per square metre. A one-bedroom basic apartment is selling for R2.25 million and a five-bedroom penthouse boasting a private lift, two butlers and a garden has a price tag of R45 million. MD of Central Square, Sergio Aquino, said about 80 of the 181 available units have been sold. The target is the sale of 100 units to forge ahead with further construction.
Renprop is part of a development called 101 On The Park, a 15-storey building with 240 apartments on Katherine Street. One- and two-bedroom apartments sell from R1.5 million and occupation is expected to be in 2016.
Another two luxury apartment developments are selling off-plan; Metropolis on Park and Embassy Towers, with basic apartments selling for up to R6 million.
MD of Renprop Chris Renecle said the investor market in Sandton has opened, with more developments set to come online. “In 2014 the market was relatively stable. Most residential developments were from investor purchases. Sandton is still going to have more demand in the next two years and the pricing [on apartments] is going to increase,” he explained.
However, the renewed interest in apartments in Sandton is indicative of a market playing catch-up since the 2007/8 global financial crisis. “The market was tanked and banks have been recovering from the glut of debt given out. Banks [at the time] did not want to give out debt to developers to buy properties or land,” Aquino told Moneyweb.
This has created a shortage of residential units, as there was no development being rolled out. In Sandton there is a shortage of up to 4 000 residential units, said Aquino. “We are well under the ratio when it comes to residential versus commercial property in Sandton. It has been more about pent-up demand,” he says.
Over the last three months, about 30 sectional title apartments are estimated to have changed hands in the Sandton area ranging in value from R1.5 million to R3 million each. Despite developers now taking risk, costs associated with developments are now high. Renecle said land is expensive in Sandton and developers are opting for the high rise option to buffer against development costs. Developers now have to buy existing clusters of buildings in Sandton, make an offer to existing tenants to demolish and rebuild their preferred developments.