06 Dec 2013
From a rare occurrence to about 4 percent of formal residential properties, estates might become an even more common option in the future housing market.
“With rising security concerns we’ll see a greater diversification to gated properties which might also be more tailored towards affordable properties,” says Hayley Ivins Downes, head of property at Lightstone.
A recent survey by Lightstone reveals a rise in estate living in South Africa noting that even though the amount of new properties built inside estates are comparable to pre-housing boom volumes it should be remembered that new developments in general have also declined.
Estate developers and risk assessors will find value in not only considering the absolute price of potential projects but also the rate at which estate property values are currently growing.
Ivins Downes explains that estate house price inflation seems to be a leading indicator of new developments and they give a sign of new developments expected in the next two to four years.
“It would therefore be prudent to consider inflation not only as an indicator of the next boom but also as a sign that the demand might become tempered in the future,” says Ivins Downes.
She explains that estate living has become a significant part of the South African property landscape and although boomed-off areas of existing suburbs were some of the first signs of communal security, property developers soon adapted to cater for this demand and different estates evolved from there.
Today the majority of properties in gated communities are located in secure estates (85 percent) such as Waterford Estate and golf estates (12 percent) such as Dainfern Golf Estate while the rest are located in other niche estates like the Waterfall Country and Equestrian Estate in Gauteng.
From 1996 to 1999 only around 4 500 houses were registered in estates every year and this has increased steadily in 2000 growing at an annual rate of close to 30 percent, starting at 5 500 units in 2000 and peaked at about 28 000 units in 2007.
However, Ivins Downes explains that this increase could have been predicted if specific market indicators such as pre-housing boom phase (1994 – 1999), housing boom phase (2000 - 2007) and housing crash and post-crash phase (2008 - 2012).
Pre-housing boom phase
According to Lightsone, the dawn of democracy ushered in new economical changes in the first five years after 1994.
International trade increased, interest rates stabilised and economic growth was slowly picking up, growing at an average annual rate of only 2.7 percent.
In the next eight years, this growth would increase to nearly 4 percent thus increasing demand for more formal houses in the country.
Ivins Downes says house price inflation of both Golf estates and other gated communities was about 6.5 percent annually - not indicating a big demand from buyers and therefore wasn’t a great investment opportunity for developers, but, this changed when economic growth slowly started picking up in 1999 and accelerated after 2000.
Housing boom phase
Year-on-year house price inflation increased from -5 percent in 1997 to 28 percent in 2003.
Ivins Downes says even though house price inflation peaked in 2003 and had reduced by more than half by 2006, new developments were still increasing annually.
“With increasing inflation and interest rates it became less affordable to buy a property and 2005 saw the first major drop in house price inflation, and yet more properties were being built in estates.”
Housing crash and post-crash phase
She says the downward inflationary trend continued and while new developments in estates peaked in 2007 their value was growing at 5 percent every year.
In the wake of the subprime mortgage crises, the amount of new developments quickly contracted, cutting output from 28 000 units in 2007 to 6 900 units in 2009 and reaching a minimum of about 6 200 units in 2010 and 2011.
According to Ivins Downes, since the crash, house price inflation in estates has stabilised and returned to pre-housing boom levels of about 7.5 percent annually and seems to be on the increase.
Due to the fact that house price inflation is very much dependent on long-term debt cycles and economic growth, it can be argued that it will increase more rapidly once economic growth picks up and household debt decreases, she says.
Demand for estate homes
In Gauteng, Seeff Properties report an increase in demand for residential estates pointing out that this trend is no longer exclusively limited to only the higher income brackets.
Buyers are prepared to pay a premium for safety and estates generally offer top notch security systems, electrified fences, armed patrols and gates being manned by guards 24/7 and many also have additional attractions like golf courses, clubhouses, tennis and squash courts, gyms, walking trails, parks, schools, access to highways, and modern buildings, for example.
In Pretoria East, the agency says homes in secure estates are priced from R1.25 million in the Wilds Estate to luxurious homes of up to R22 million in Mooikloof Equestrian Estate.
Mooikloof Equestrian Estate only has a handful of stands available before being fully developed and the price bracket between R4.8 million and R7million is the most active market.
Silver Lakes, recently voted as the most secure estate in South Africa, offers very expensive property priced up to R15 million and the greatest demand is for houses priced below R4 million.
The estates in Brakpan strive on exclusivity and people are prepared to pay roughly up to 20 percent more for vacant land in estates than in open suburbs and the agency points out that vacant land was recently sold in the Helderwyk estate for 50 percent more than what it would have been sold for outside the estate.
Helderwyk estate is the most sought-after estate in Brakpan with property prices averaging around R5 million.
The Johannesburg South area estates like Meyersdal Eco Estate, Meyersdal Nature Estate, Bassonia Estate, Aspen Estate and Eye of Africa Golf and Residential Estate all boast a secure quality lifestyle with slightly higher monthly costs, but living there is not necessarily limited to the wealthy.
Homes in the Meyersdal Eco Estate sell from R4.5 million and many who have lived in the suburbs with paid-up properties choose to upgrade to estates with the Eye of Africa having had good success.
Estates such as Thorn Hill Estate, Lakeside Village, Thorn Valley Estate, Bushwillow Park, Waterstone Park, Emerald Estate and Pebble Creek estate in mainly Modderfontein and Greenstone feature anything from upmarket man caves to homes with cinema rooms and indoor pools, according to Seeff.
Expect to pay prices of between R2 million and R6 million on average and growth is beyond market growth as a result of the dwindling supply of similar properties in the area.
The huge demand for these types of communities is due to a desire for more control by owners over security and micro infrastructure, according to the agency.
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