"Conventional wisdom relative to cycles in the real estate market suggests the start of a property market recovery is characterised by some or all of the following factors: low values, a decline in foreclosures, some easing in credit availability, low turnovers and a shortage of stock, and a pent-up demographic demand.
"In my view residential property, especially in the areas of the 'golden triangle' of the Western Cape, North Durban/Umhlanga and Johannesburg display all these characteristics. In La Lucia, Umhlanga and Umdloti particularly property prices are in most cases well below their new equivalents. Banks are finding value more readily and credit is easing, albeit at a gradual pace."
Schenk says researchers in the US describe a number of overlapping cycles in the real estate market, with shorter cycles of three to five years, and longer cycles of nine to 10 years. In South Africa, the market softened during 2008/9, but more recently has displayed the green shoots of renewed growth. Over the longer term, changes in demographics and consumer buying power are major drivers of the property market. It is a combination of these factors, which is fuelling the demand for property in areas such as Umhlanga and Umdloti, especially following several years of muted developer activity and rapid growth in the Ridgeside/Gateway area of Umhlanga.
In Ridgeside on Umhlanga Ridge, more than 220 000m² bulk commercial property has already been transferred, with large corporates such as Investec, BDO (Accountants & Auditors) and Vodacom recently joining many others on the Ridge, which is set to capitalise on KwaZulu-Natal's growing economy and expanding trade connections, which are opening up a number of attractive investment opportunities.
In Umhlanga Village, Beacon Rock development, which is already under construction, is a mixed-use project, incorporating 68 apartments, which launches in December 2011. In the Gateway node, adjacent to Chris Saunders Park, there is a 68-unit apartment building called 'The Elements', which will employ 'green' technology to minimise its carbon footprint.
"It is no coincidence that two developers - one part of a large Gauteng group - have chosen Umhlanga as an investment destination. Umdloti too is no longer living under the shadow of its supposedly more illustrious neighbour. The advent of the King Shaka International Airport and the busy Dube Tradeport has revitalised the area, leading to a strong increase in demand.
"With world markets still unsettled and the threat of a 'double dip' in Europe, equity markets remain nervous and even the gold price seems to lack direction. There are however pockets of renewed growth in property - for many the only trusted hard asset - where oversold positions and demographic shifts have fuelled demand. These areas include the east coast of the US and London and the south-east part of the UK. I believe the same dynamic, coupled with additional local features, is set to drive the Umhlanga and Umdloti property markets for the next decade and beyond," he concludes.
