For a while now developments have been capturing a large segment of the local real estate market. Do developments still offer good value for the purchaser? Or has the resale market caught up?
An interesting trend over the past few months is that resale listings have reduced in number, and development listings have increased in number. It’s been a long while since we’ve seen this situation, probably most closely related to the property market in 2005 and 2006. What’s changed since then?
In short, the nature of the developer has changed. Back in 2005 the developer called the shots. There was no Consumer Protection Act. Developers dictated the terms. And the market was so strong that purchaser had little choice but to accept what was thrown at them.
It’s not the same today. Developers have learnt that it’s important to consider the needs of the purchaser. Contracts are much fairer. And developers have gone to great lengths to deliver a product and a service that purchasers require. The end result: a happier purchaser, a more competitive product, and a fairer selling process.
There has been a flood of new development listings into the local market, and this trend looks to continue as buyer demand continues to increase. Developers go to great lengths to research what it is that purchasers are looking for. They create a product that meets buyer demands and ticks the boxes. In addition to this, they are also negotiating hard with their suppliers to provide the end product at very competitive prices.
There are a lot of costs that a developer can’t control. Not the least of these are the contributions to the municipality that make it a condition of approval that massive infrastructure costs in surrounding areas are financed by the developer. Not fair, but that’s another issue entirely…
So, to produce a product with competitive pricing the modern developer goes to great lengths to keep other costs to a minimum whilst delivering a quality product.
The Consumer Protection Act obliges the developer to ensure that there are certain minimum quality standards that are adhered to. Purchasers have recourse if these standards are not met. That gives added protection to a purchaser that they will not enjoy with a conventional resale property.
The discerning purchaser will do well to research development listings before making a final decision. In most cases patience is required as development properties need to be constructed, or in the case of vacant land, serviced. But the delay in transfer allows for growth in the property value so that, by the time you pay for your property, it’s worth more than you paid and you’ve already made a profit! Not a bad business strategy.
As with all property purchases, be sure you understand fully what you are purchasing. Read the sales contract properly and ask questions if you’re not 100% sure. When you know what you’re buying, development properties can prove to be outstanding value. And with more developments shortly to be released, be sure to get in quickly and benefit from introductory pricing.
Principal of Harcourts Platinum
Director of Harcourts South Africa