Inframax Holdings, a property developer active in the middle to upper end of the residential property market, has closed its order book because of the overheated state this sector finds itself in.

Willie Els, the managing director of Inframax, said: "The amount of activity going on out there is scary. Even more concerning is the amount of work that is in the pipeline."

But Inframax is not the first to comment on the oversupply being created in the market, especially as far as the development of townhouse complexes to the north of Johannesburg and the east of Pretoria are concerned.

The surge of investments in this industry has been fuelled by the low interest rate environment as well as the spike in speculators entering the market. Many people have turned to residential property as an alternative investment and as a means of earning rental income.

Although they had closed its book, Els said the company had enough secured projects to see it through to the end of the 2006 financial year.

This would see turnover increase from R50 million in the 2004 financial year to R170 million in 2005 and R280 million in 2006.

He expected more work through the company's management agreement with the New Housing Company (NewHco) in the next couple of years, which was set to come from an increase in the roll-out of low-cost housing projects.

NewHco, a section 21 company established in 1991 as a national operating housing utility company with the focus on low-cost delivery, had a turnover of R65 million in the 2004 book year, which is set to increase to R125 million per year in the next two years.

Els said that initially most of the proceeds were to come from retirement village developments, although this was set to shift towards mostly low-cost developments in the 2006 financial year.

The private sector had found it difficult to operate in the low-end of the market over the last few years because it had been structurally excluded from engaging with the government as developers, he said.

This explains why NewHco only built 800 houses in the last financial year as opposed to about 10 000 per year previously.

Els said the operational arrangement still had to be implemented and only time would tell if it did increase the work flow.

Since inception, NewHco has built 124 000 houses and it has the capacity to roll out 12 000 houses per year on a sustainable basis.

John Weaver, an executive director of Inframax, said the company had also made some strategic direct investments in properties, most of which were neighbourhood shopping centres, as a hedge to its development business.

The book value of these investments currently stands at about R60 million.