It is unlikely that Sandton will see any more luxury high-rise apartments in the medium term.

Financial Mail reported recently that an unprecedented jump in building costs and a sudden shift in sentiment to offices, had scotched two high-profile, high-rise residential developments in Sandton.

It reported that buyers of off-plan apartments at Sandown Isle in Rivonia Road and The Sandown off Grayston Drive discovered recently the apartments would never be built.

But other property commentators say the high-rise apartment blocks, until recently in vogue with the wealthy, always had a limited buyers pool and appeal more to foreigners than locals.

David Green, MD of Pace Property Group, says there is a "limited buyers pool for high-rise apartments" and investors who had wanted to invest in this kind of lifestyle development had already done so.

"The market is saturated. As a result the likelihood of any further high-rise residential developments in Sandton is highly unlikely," he says.

Green also believes the Cape Town City Bowl is "heading in the same direction". He says these latest problems are linked to the "tapering off of the top end of the residential market".

After a residential property boom that has gone from strength to strength in the past two years, there is evidence from major banks that the rate of growth of prices in the top end of the market is slowing down.

Green says these luxury apartments sell for R16000/m² or more in Sandton, while in Cape Town they sell for more than R30000/m².

He says the majority of buyers of luxury high-rise apartments tend to be foreign investors.

"That type of lifestyle is generally less appealing to South African investors. South Africans enjoy outdoor life. They would rather buy a house than live in an apartment," says Green.

He says the main attraction to a high-rise apartment is the perceived security it offers.

Green says less than 1% of South African residential real estate comprises high-rise luxury apartments.

Colin Young, fund manager of Old Mutual?s South African-listed property funds, says the Cape Town central business district is an exception because it is going through a renaissance. There is still demand for luxury apartments in Cape Town because of its strong tourism industry and the fact these developments offer sea and mountain views.

But, Young says the only reason for a local wanting to buy into a high-rise apartment block in Sandton central business district are the traffic congestion problems travelling to Sandton presents.

"High rises are far more attractive in a Cape Town scenario. Cape Town high rises appeal to locals and foreigners," he says.

Property economist Francois Viruly, of Viruly Consulting, says he still believes building costs have put a dampener on high-rise developments.

"Building costs have escalated by close to 30% and these kind of developments have very high steel requirements. These materials have gone up very fast," says Viruly.

"These owners with units will probably be happy with the news that supply is slowing. The moment supply and demand conditions are back in equilibrium we will start seeing capital values rising again justifying new developments," Viruly says.

The existing space in the market will be "mopped up" in the next 24 months and that the market needs to take a "breather".

"This is certainly not the end of the story."

Business Day