October 29, 2004

By Roy Cokayne

Pretoria - Staggering demand and attractively low property prices were driving a resurgence of interest in South Africa's inner-city residential markets, according to a new report.

The pull of once notorious areas like Hillbrow and Yeoville in Johannesburg, or Sunnyside in Pretoria, or even Albert Park in Durban, was stronger now than ever before, said the Trafalgar Inner City Report 2004, which was released yesterday.

But the report, which provides existing and potential property investors with a range of information to enhance decision making, said dysfunctional sectional title schemes were probably the biggest problem in the inner cities.

"They are the focus of overcrowding and the biggest municipal debt defaulters. At their worst, they are black holes that suck the surrounding environment into their decline.

"It has become a political, social and financial battleground peopled by a wide range of walking wounded. The banks have lost billions, the municipalities too. Owners who bought at R70 000 in 1994 now have a property worth R15 000 - but still owe R60 000."

"The buildings are under the stress of four or five times the people they were designed for. Triumphant are the flat hijackers, rapacious 'managing agents' and 'tenants committees', whose main aim is to divert the buildings' rental and levy income streams to their own bank accounts," the report said.

But Neville Schaefer, the chief executive of Trafalgar, and property journalist Ian Fife have a plan to turn these buildings around using a judicial administration of sectional title bodies corporate as the core of their plan to rebuild the value that has been destroyed.

The report said Durban had enjoyed rental growth of 114 percent since 2000 and was currently seeing the highest rental levels of the three cities.

Johannesburg rentals had been more volatile, with 33 percent growth, while Sunnyside rentals rose by 39 percent.

Trends in property sales highlighted some of the stark differences between the three markets.

It said 663 sectional title units had been sold in Johannesburg's inner city since 2000, which was a fraction of the 2 556 units sold in Durban or the 3 273 units sold in Sunnyside in Pretoria in the same period.

Prices in central Johannesburg had increased steadily from an average R28 470 in 2000 to an average of R42 339.

Sunnyside had experienced a similar increase in average sale prices from R68 661 in 2000 to R93 230 this year, but prices in central Durban had remained fairly static.

The rental market in Durban was strong and growing; Johannesburg's property sales were rising, although this was from a low base; and Pretoria might not be faring too well with rental increases, but sale prices were moving upwards.

The inner-city turnaround was probably most evident in Johannesburg, despite the fact that about 25 percent of the housing units across the inner city was in a poor state or worse.

The number of bad buildings almost doubled from 120 in 1999 to the current count of 235