Property developers have hit the ground running to make up for construction delays caused by the lockdown and keep their new developments from going under. Some have been fortunate enough to be able to pick up where they left off at the end of March and keep their planned developments on track but there will undoubtedly be a number of others whose deals have succumbed to the long lockdown.
There could also be fewer residential developments coming to the market due to Covid-19. The past few months have been challenging but Rawson Developers’s Brad Morgan says none of its developments have been cancelled. Its two new residential development projects, The Westwood, an affordable yet luxurious development in Observatory, and the flagship Newlands Peak in Newlands have, however, been delayed by two months.
“We were about 60% sold out at The Westwood when lockdown began. The first three weeks of lockdown were very quiet which forced us to really put our minds together and think out the box,” he says. Introducing a few deals on the remaining units allowed the remaining 40% to be sold in a month.
Sales for Newlands Peak go live on June 30. Although Rawson Developers is forging ahead with its developments, Morgan believes the property development industry in general will see fewer developments in the coming months. “Many developers have experienced cash flow-related issues because of the lockdown and that is bound to affect some of them in a negative way. I also think many will be uncertain about whether there is a market and they may wait until they feel things are more certain.”
He adds, however, that there is still “most certainly” a demand in South Africa for the right product at the right price. “Property is a resilient asset class, especially during tough economic times and this, together with low interest rates, really has created a demand. “We feel there has also been a shift from rental demand to buying demand as the interest rates, which are at a record low, mean people can now afford to buy a property for a similar amount that they would normally rent for.”
Work on Rabie Property Group’s projects that were under way before lockdown – Sable Corner and Bridgewater One in Century City and Oasis Life Clara Anna Fontein, its retirement offering in Durbanville – has been delayed but picked up where it left off and has already gained some momentum, says chief operations officer Colin Anderson.
Furthermore, two new projects – Oasis Life Burgundy Estate, a retirement development in Milnerton, and residential development Cape Gate Crescent in Brackenfell – broke ground in the first week of this month. Whether there is a general slowdown in new developments post-lockdown will depend on individual developers but Anderson says the lethargic economic conditions pre-lockdown would be a much stronger argument for a slowdown.
“The lockdown and subsequent additional pressure on the economy most definitely have an influence but they have only exacerbated a pre-existing pressure cooker. “Our construction industry and investment – foreign and local cash injections – will remain subdued until such time as our economy gains positive traction.”
He says businesses are currently in survival mode with all energy channelled towards continuation. “It is only once business confidence has been regained that we’ll see a resurgence towards growth.” Still, Anderson says residential developments will always continue as people need homes and there are new entrants into the market consistently. “Demand and supply are as old as time and I believe that this market is the most resilient. Safety, security and convenience remain top priorities and developers who can offer a great product at competitive prices will continue to do well.”
The nationwide lockdown stopped all of FWJK’s developments “dead in their tracks” for two months and the resumption of activity is taking time to ramp up to pre-lockdown levels, says chief executive Dave Williams-Jones. This is due to the Covid-19 precautions that contractors needed to introduce. Some of its residential developments have also taken hits due to collapsed demand as a result of Covid-19 and the global economic recessions.
“But we are hopeful that by the first quarter of 2021 the economic mood will start improving and buyers will start re-emerging in greater numbers. “Curiously buyers, especially foreign buyers, are already active in the Cape Town market, seeking out our value offerings made especially attractive by the depreciation of the rand.”
Some of the company’s developments that have just launched, or are about to launch, in KZN include Wharfside at the Point Waterfront in Durban and a mini and micro industrial park in Ballito. In the Mother City, a top-end, ultra-luxury residential development called Clifton Mystery was launched recently on the Atlantic Seaboard.
Generally, he believes there will “definitely” be fewer residential developments coming to the market due to Covid-19 as the price margins for profit-driven developers come under downwards price pressure. “We expect this depressed status to endure for at least the next 12 months before there is any return to normality.”