First National Bank (FNB) noted a strong demand for residential property in Gauteng’s townships, with seven potential buyers for every property on the market.

This week’s FNB fourth-quarter 2005 Residential Property Barometer, an index measuring real estate agents’ perceptions of activity in township markets, rose to 7,5, compared with 5,8 in traditional metropoles.

At the same time, retail property development in townships is on the rise with several projects in the planning or in development stages in Soweto, for instance.

FNB economist John Loos said that with township property market on the up, some feared another wave of migration by businesses and people away from Johannesburg’s central business district, repeating the move to the suburbs in the 1980s and 1990s.

But Loos said if expectations of strong economic growth were fulfilled there should be enough demand for central business district as well as township building space.

He said the main challenges of inner cities and townships remained the structural adjustments to suitable "mixed-use areas" if they were to prosper.

Not all agree. Property economist Francois Viruly said it was possible that retail development in Soweto would detract from retailing activity in Johannesburg’s central business district (CBD).

Viruly said in August last year that such development would primarily take out higher-order retailing from Johannesburg’s central business district, such as more expensive furniture and clothing stores.

At the time, Viruly asked: "Will the Soweto shopping centres provide a more attractive outing than the CBD?"

But Loos said there was enough space for township commercial development and central business district rejuvenation to take place simultaneously.

"We (SA) were stagnating in the 1980s because of boycotts, sanctions and the deteriorating political situation. This time around you have an economy where growth is actually accelerating," he said.

"One needn’t see a situation develop where the Soweto commercial property developments leave CBD property empty."

Loos said, however, the CBD had to develop sufficient middle-to-upper income residential property to create a residential market with the buying power to support more up-market retail and services developments.

To this end, both types of areas needed to change.

"Soweto and the CBD both have to transform themselves into multiuse areas to prosper," he said.

He said if Soweto and the Johannesburg central business district did not do this they may both lose out to the suburbs.

"Soweto and the CBD aren’t really competing against each other. Both of them are competing against the traditionally white suburbs. When the economy is growing so strongly few areas need to feel threatened."

Cannon Asset Managers chief investment officer Adrian Saville agreed. "If you look at the way cities have developed in SA historically, what you find is that the commuting time required between place of work and home in SA has been very large for most South Africans. That is a relic of apartheid. Any developments that start to reverse some of that spatial anomaly will be met with obvious demand," said Saville.

Property economist Erwin Rode said any central business district had one advantage over the decentralised areas. The central districts had a "captive audience", who still commute into the centre every day.

Despite this, the Johannesburg central district would get a run for its money from development in Soweto, he said.