Is There Still a Market for Plot Sales?

With the growing demand for properties in gated estates, which are mostly sold as turnkey or plot-and-plan products, is there still a market for vacant plots in the residential suburbs?plot-and-plan11

The short answer is “Yes”. After the global financial crisis when the banks lost much of their appetite for home loans, they weren’t that keen to finance vacant land.

The banks reduced their loan-to-value to 60% of the sales price of plots, and were very selective in the bonds they would approve. This was all to do with risk, and the fact that vacant land doesn’t produce any income, as apposed to a dwelling, which can be rented out to cover at least some of the bond installment.

The result was that sales of vacant plots from about 2008 to 2012 were very scarce, with the values of vacant land taking a severe drop.

However, for the last 2 years the market has regained their appetite for plots. One of the main driving forces behind this is that the values of resale properties have increased, making it viable to consider purchasing a plot and building.IMG_8253_stitch_f_Print-Res

Banks are also much more open to funding a plot-and-plan sale now, and the availability of finance has resulted in more buyers being in a position to consider purchasing a plot and building than was possible 2 years ago.

Be aware that obtaining 100% finance is not possible. But if you have the cash required to make up the difference then building your dream home on a plot is an option to consider.

When I started real estate 25 years ago my mentor told me that no one is making any more land. How true that is now with demand for plots in prime positions being stronger than we’ve experienced for years.

There simply is nothing to compare with moving into a home that has been specifically designed for you and your family. The “smell” of a new home, like that of a new car, it something very special.

True, building has its’ headaches. I’ve home-renovations-contractors-torontopersonally built over a dozen homes and I can’t say it gets any easier. Budgeting for a new build is a skill and I haven’t met one person to come out on budget. So be prepared for some surprises!

As a general rule, in the Helderberg, the land component comprises about 1/3rd of the completed property value. In Sydney, Australia, for example, the land comprises about 65% of the completed value. So by comparison, our land is       great value.

The growing demand for single residential plots in the suburbs has seen the prices increase well over the past few years. If you find the plot of your dreams and you have    the cash required, it’s certainly something to consider. Remember, no one is making     any more land.

Steve Caradoc-Davies
Principal of Harcourts Platinum, and Director of Harcourts South Africa

Email your real estate question to steve.cd@harcourts.co.za.

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