High land cost stymies housing development
A shortage of affordable development land is one of the biggest stumbling blocks facing developers in South Africa.
"There is no question that land is available for development," says Braam van Niekerk of Chas Everitt Development, the property development arm of the Chas Everitt International property group.
"The problem is that landowners have a skewed idea of what the land is worth and often peg the asking price at levels up to 100 percent more than the real market value," he says.
"However, it is unviable for developers to pay more than 10 percent of the development costs for land intended for sectional title units and 30 percent for land for cluster developments, and the high prices are forcing many established as well as up-and-coming property developers to abandon the industry - to the detriment of alleviating the country's housing shortage."
Van Niekerk says most landowners are unaware of the true costs of preparing virgin land for development. "In the first instance, developers have to pay VAT of 14 percent, agent costs of five percent, and up to R120 000 per stand for services such as water, sewerage and roads."
He says the other major factor slowing down development is the inability of most municipalities to process applications for new developments. "There is a serious lack of capacity in many municipalities and the process can take anything from 18 to 24 months.
"These delays pose a serious risk to the property development industry. Very few developers can afford to commit millions of rands to a project and then wait for up to two years for permission to go ahead," he says.
Municipalities' policy on the so-called "urban edge" is also often unrealistic and is a further damper on development, Van Niekerk says. Such policies are in force to limit development on outer city limits. The aim is to promote higher density development in an attempt to better use existing infrastructure.
But, says Van Niekerk, in many cases the guidelines are so ill-considered and out of step with demand for housing in an increasingly urbanised society, that some municipalities are already being forced to quietly ignore their own regulations and allow development outside the urban edge.
Issued by Chas Everitt International
For further information call Brenda Smith at
Chas Everitt International Bryanston on 011 463 2033
or visit www.chaseveritt.com