Development trends for 2018

10 May 2018, Thursday

 

Published in LUXE magazine’s May – August 018 edition

My vantagepoint is very closely related to the residential development space and this is where KZN is such a formidable force at present and for this reason, is attracting investment from around SA and abroad.

I am often asked where people should be investing, and I firmly believe that there are 3 areas in KZN that will consistently outperform any other. These are: greater Umhlanga, Sibaya Coastal Precinct and Ballito / Salt Rock. Those who invest in an estate there will not only find good options but will also experience higher capital appreciation and rental demand than any other region.

The last 12 months have been characterised by big national players entering the KZN property market, mainly within the areas mentioned above, resulting in significant land acquisitions and very strategic development plans. This is further evidence of the province’s attractiveness to investors and the market’s buoyancy, despite the inescapable political uncertainties we face. It’s no coincidence that Balwin, Amdec (the team behind Melrose Arch and the Evergreen Lifestyle retirement brand) and Abland have all invested into KZN in quick succession and it’s a real sign that our home-turf is now being taken seriously.

2018 will continue to be an interesting period, and I believe there are 4 key trends that will shape the development landscape this year.

  • Price-point

The 2017 Cape Town property boom saw buyers sacrificing space for a desirable address. As a result, developers created compact spaces to bring down the overall price point of the property whilst still maintaining a strong price per m² necessary for the development of the product to remain financially viable.

This model works well for the investor too as rental income is directly related to the number of bedrooms as opposed to the size of the unit, which means investors are paying less and still fetching a similar rental income.

The attraction of KZN is that property rates are much cheaper than Cape Town, and this is one of the major reasons why the trend of ‘semigration’ – the term that refers to people seeking a better quality of life elsewhere in the country – is being seen in KZN and this bodes well for our residents and property market.

In the last 12 months R2.7 billion in residential transfers occurred in the greater Ballito area, and 80% of these are in secure estates. Most interestingly, the total number of property transfers has increased by 18% to 1002 units indicating. This is an indication that affordability is more of a consideration as the demand for the area increases.

Affordability is the biggest challenge for any new development and going forward there will be a major trend towards people willing to compromise on size in order to secure an estate address matched to their affordability and aspiration. Watch out for the growing success of smaller developments popping up within new and existing developments which will offer smaller sectional-title spaces or compact home-package options at a more affordable price.

  • Investor returns

The short-term rentals market is growing rapidly as property owners (investors and primary residential owners) seek to “sweat” their assets to help service the unavoidable costs of levies, rates and maintenance.  The owner-benefits of business models like Airbnb will continue to evolve, and 2018 will see developers becoming more astute in how they configure their product offerings to ensure that spaces, and architecture, are optimised to attract short-term rentals whilst also strategically seeking to allay any concerns around security or privacy. Leading developers will also continue to evolve to offer smartly packaged turn-key furniture options, and in-house rental management solutions, to provide a compelling ‘plug-and-play’ solution for any investor wanting to rent a unit out from day one of occupation.

  • The key differentiator

As more development products become available, developers can no longer expect to successfully launch and sell a development unless they offer something unique. It’s vital for developers to identify a product’s key differentiator and build on that – it could be an exceptional location, unique price, facilities, an unusual natural attribute or stunning sea views.

The residential market is savvy, and relatively spoilt for choice, which is why developers need to find that key differentiator upfront. This is why it is so important to do proper research beforehand and formulate a product around what the market demands. This is critical before any product can go to market.

This will result in the continuous evolution of new developments in both product offering and packaging.

  • Retirement

One can no longer think about residential development in KZN without considering the retirement market. Since Tongaat Hulett launched their Retire KZN campaign 18 months ago, over R1.1 billion has been directly invested into KZN’s retirement market by retirement developers and purchasers alike. The balance of 2018 will see further progress in this area with new retirement players entering the market complementing the existing mix of retirement developers. Today, retirement developers are reconceptualising living for the latter years by offering ‘lifestyle retirement’ – a far cry from the stigma of old-age living which previously existed.

KZN can be proud that it has garnered the attention of leading retirement developers set on transforming the concept of retirement and upping the ante on onsite care facilities whilst providing amenities which outperform many residential estates.

The rest of 2018 will see significant strides in evolving KZN into the leading retirement destination in Africa.

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