By Margie Inggs

Durban has been the place to invest in the residential property market over the past year, but if you haven't already caught the boat it might be too late, as prices are starting to level off.

Keith Wakefield, the head of Wakefields, one of the city's most prominent estate agents, said last week that Durban prices had shot up by 35 percent during the past 12 months, compared with the national average of about 22 percent.

"Durban has lagged so far behind Cape Town and Johannesburg that it's now been playing catch-up," he explained. "However, local prices are still about 20 percent lower than in the other big cities."

Absa's latest quarterly housing report notes a 29.3 percent rise in middle-class Durban metropolitan prices for the first quarter of 2004 compared with the 2003 first quarter. The national rise was 22.3 percent.

The Eastern Cape is another area that has been catching up rapidly.

Owen Dormehl, the chairman of the KwaZulu-Natal branch of the Institute of Estate Agents and national managing director of Acutts, says he wouldn't be surprised if prices in Jeffreys Bay, Port Elizabeth and Port Alfred have escalated faster than in Durban.

"In Jeffreys Bay, vacant land that was recently selling for R30 000 is now valued at R250 000 and in St Francis Bay, properties have doubled in price over 18 months," he says.

"The Jeffreys Bay market has suddenly changed, with German and Dutch investors buying high-rise developments along blue flag beaches."

Acutts has also received inquiries from Greek and Portuguese nationals about properties along the KwaZulu-Natal south coast.

Wakefield says many investors are starting to realise the value gained by buying along KwaZulu-Natal's north and south coasts, where the climate is great all year round.

Umdloti and Ballito are fast becoming hot spots following land releases at Zimbali and new housing developments, particularly in the upper Highway area.

"Umhlanga has expanded because it is near Gateway and Durban, while there is a lot of demand for property in Hillcrest," Wakefield says.

Umhlanga properties have appreciated at roughly the same rate as those in Cape Town - about 25 percent over the past two years - while in Hillcrest they have shot up by 40 percent, albeit off a very low base.

Properties along the entire Durban beachfront have escalated by about 50 percent over two years. Wakefield attributes the steep rise to high demand from previous township residents. But even in townships and less affluent suburbs, house prices are riding the crest of the property wave.

"In Umlazi, a house recently fetched R240 000, compared to the top township price of R85 000 four years ago," Wakefield says.

Sihle Magubane, manager of Magubane Estates, says sales currently are better in the townships than in the suburbs, where there is a desperate shortage of stock. However, lack of financing is a stumbling block.

"The stock shortage in Pinetown is driving up prices in former Indian areas like Nagina and Wyebank, to which a lot of former township residents are moving," he says.

"But people are still buying in the townships, where we are currently making about 60 percent of our sales. Many of these are to former squatters."

Prices in KwaMashu have risen about 33 percent to as much as R150 000, but in Umlazi, where houses are about 60 percent more expensive, properties are out of stock, he says 
 
National statistics tell their own story. Jacques du Toit, a senior Absa economist, said in the bank's May 20 property trends report that building plans passed for new residential buildings during the first quarter of 2004 gave a clear indication of the current strong demand for property.

"However, the supply of new residential buildings ... appears not to have kept pace with the continued strong demand," he said.

The national average price of a new house in the first quarter was about R615 300 - a nominal increase of 11.4 percent and a real rise of 10.9 percent from the same quarter last year.

"New residential properties in the pipeline ... should address the supply constraint, provided building contractors can cope," he said. "This, together with factors such as projected higher inflation and interest rates later in 2004, is expected to lead to some cooling off in the residential property market towards the end of the year."

Wakefield doesn't believe there is any chance of the Durban property bubble bursting: "The number of house hunters could be halved and supply would still not meet demand."

While there could be a "slight correction", he doesn't believe prices will fall.

The trend to convert city commercial properties into residential blocks has not caught on in Durban as it has in Cape Town.

However, investing in apartment blocks along the Esplanade and at South Beach could still be a good way to make a fast buck.

Ralph Schambacher, an SA Stockbrokers portfolio manager, says many smaller investors have pulled their funds out of equities and are finding property a more attractive investment.

Even in areas that buyers previously shunned, properties are selling like hot cakes.

Neil Swartz, the owner of Swartz Estates, says the price of two-bedroom apartments along Durban's Esplanade have risen from R160 000 last August to R220 000 in January and are now going on the market at about R300 000.

"Bachelor flats have shown the same trend, with prices rising from around R70 000 in August to R120 000," he says. "There are simply not enough to satisfy demand."

However, prices in the inner city and at the back of the Esplanade have remained fairly stable at the bottom end of the market, with bachelor flats fetching about R50 000. "The main reason that properties in these areas are not moving is that no financing is available," Swartz says.

Although the banks no longer practise official redlining, Swartz says financial institutions would not look at blocks that were deteriorating because levies were not being paid.

"While they [banks] generally won't lend on South Beach blocks a couple of streets back from the seafront and at the back of the Esplanade, they might consider approving a bond if the balance sheet and client are excellent," he says.

First National Bank confirms that every application is considered on merit.

The boom has cleared estate agents out of everything they thought would never move. Durban property prices could be boosted even further if the city wins the bid for the 2010 soccer World Cup, which would push long-delayed projects such as an efficient people mover for the city.