Egoli stalks price crown

Posted On Thursday, 11 April 2002 02:00 Published by
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Atlantic coast has been the best bet, but that may change
Clifton, Bantry Bay and the V&A Waterfront in Cape Town are the hottest spots in SA in which to own a flat, with prices heading for the stratosphere.

But where should you invest to get the best return? The answer may be Sandton Square in Johannesburg.

Despite Cape Town's foreign buyers, it looks as if the Sandton apartments are at least keeping pace with the Cape's best. And experts cannot agree where they would buy an investment flat.

The cost per square metre of a prime sectional title unit ranges from R15 000 in Bantry Bay, R25 000 in Clifton and as much as R32 000 at the Waterfront's Water Club development.

Michelangelo Towers, the luxury block that will be part of the Sandton Square, Sandton City commercial and civic complex, is asking - and getting - up to R28 500/m² for the 'king suites' on the 23rd floor. Even the lower-level units start at R15 500/m², equal to Bantry Bay. Prices range from R1,5m to R14m.

The average sectional title flat in a middle-income SA suburb sells for between R3 000 and R4 000/m².

Johannesburg lost its residential primacy 20 years ago, when local and international buyers pushed Cape Town's prices above Egoli's for the first time. Johannesburg's three-year revival has been so swift that though Michelangelo developer Bart Dorrestein cautions that he has not yet reached the threshold of pre-sales to ensure the project will go up, he may be too cautious; the FM learns that his agents are within a month or two of reaching the target.

Which city will eventually be the most expensive? Cape Town, an international playground where sea, mountains and leisure options abound, seems the likely answer. Frenzied foreign buying over Christmas has fuelled a new boom. But with around 2m people, it is a small city and even at the current rate of foreign buying, about 90% of buyers are local.

Johannesburg is the centre of the Gauteng metropolis with 7,5m inhabitants and is already the business capital of Africa. The number of people is projected to grow to 12m within 15 years.

That does not impress Mvelaphanda Properties marketing director Stuart Chait. He is accumulating a portfolio of properties in Clifton and Bantry Bay to let. 'They are lifestyle suburbs and will always retain their value,' he says. 'But Johannesburg will be affected by the ups and downs of commerce. A West African businessman under pressure will sell his unit at Michelangelo before any other asset.'

His father, developer Geoff Chait, would buy at the Water Club: 'It has direct access to the sea and the Waterfront's facilities. Clifton is too congested. Johannesburg still has cheap land available that will limit capital growth.'

Colliers RMS development director Mike Deacon, who recently moved to Cape Town, says he cannot make up his mind between Michelangelo and the Water Club. 'It's a toss-up between the two,' he says. 'Water Club has limited supply and all the retail and leisure facilities homeowners want. It has excellent security and is well managed. This ensures that prices will rise swiftly.

'But Michelangelo has all these qualities and is the prime property in the largest city,' he adds. 'Clifton comes third, with less scarcity and limited facilities, while Bantry Bay is affected by next-door Sea Point's degeneration.'

Says Pam Golding Properties (PGP) Gauteng chief Ronald Ennik: 'Michelangelo will have great scarcity value. Sandton Square is unique, up there with the best in the world in its variety and vibe. It's got to appreciate at a hell of a rate.' (PGP does not sell units at Michelangelo.)

Ennik says international businessmen will appreciate they are buying in Africa, but that Sandton Square's world-class standards will emphasise for them the 'enormous disparity' between R15 500/m² for a flat in Michelangelo and R70 000/m² in New York's West Side or R180 000/m² for the equivalent property in Chelsea, London.

Neville Schaefer, Durban-based CEO of flat managers Trafalgar, agrees with Ennik. 'Michelangelo is one of a kind, with only 80 units in Africa's prime business centre,' he says. 'A whole range of people, from regularly visiting businessmen to rich pensioners, who want the convenience, luxury and status, will buy. The R1,7m units should rent for R20 000/month against R10 000/month for a R4m cottage on Clifton's fourth beach.'

It will also have faster capital growth than the Cape, he adds.

Dorrestein says that most buyers will live in their units but that 'a substantial minority' are investors. Others have homes outside Johannesburg and will use their apartments as weekday pied a terre. 'Some are international businessmen,' he says.

The flats will be built on a base of 6 000 parking bays, 10 000 m² of retail space, and staff quarters averaging R125 000 each. Occupation is expected in 2004.

Financial Mail

Publisher: Financial Mail

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