Residential developers have in recent weeks reported a spike in off-plan sales, with a number of luxury apartment buildings — particularly those in live, work, shop and play precincts — setting new benchmarks for sectional title prices.
The renewed interest in residential bricks and mortar is seemingly being driven by stock market volatility, the weak rand and inflation fears, which industry players believe have sparked a search for “safe haven” investments.
A stone’s throw from the JSE in Sandton’s Maude Street, apartments at Legacy Group and Nedbank’s uber swanky The Leonardo are selling off-plan for an average R45,000/m² to R55,000/m², believed to be a new record for Johannesburg.
Legacy chairman Bart Dorrestein, the driving force behind the development of Nelson Mandela Square in the early 1990s who subsequently also built neighbouring Michelangelo Towers, the Raphael and the DaVinci, says 70% of the first phase of 140 apartments at The Leonardo are already sold. Price tags range from R3m to R40m.
About 40% of the sales went to foreign buyers. Dorrestein says buyers have been lured by The Leonardo’s relative value proposition (in euro, dollar and pound terms) and lifestyle offering in the heart of Sandton’s CBD, within walking distance of the Gautrain station.
“We thought we would have a tough start to 2016 given the weak economy. But we’ve been amazed by how brisk sales have been since the beginning of the year,” says Dorrestein.
He believes that the appetite has been supported by the global stock market crash and on-going rand weakness, which has left well-heeled investors with few secure places to stash their cash.
“Cash-flush investors are no doubt turning to fixed property in prime locations as a hedge against currency and stock market volatility.”
He believes that buyers at The Leonardo should see the same capital appreciation as that achieved at Michelangelo Towers. “When we first launched Michelangelo Towers off-plan in 2003/2004, apartments were selling at around R18,000/m² to R20,000/m². On completion two and a half years later, investors were selling at R40,000/m².”
The R2bn Leonardo will be Sandton’s tallest building at 42 storeys or 150m. The mixed-use skyscraper will comprise up to nine floors of offices and 275 apartments, including eight 500m² penthouses.
The Leonardo will also be home to the most expensive apartment ever built in SA — a triple-storey 2,000m² penthouse expected to be worth a staggering R200m on completion towards the end of 2018.
Pam Golding Properties’ (PGP) Peet Strauss echoes a similar sentiment to Dorrestein’s, saying there has been a noticeable trend out of cash into property, as nervous investors look for a better hedge against inflation.
PGP and Amdec recently launched the fourth residential phase at trendy mixed-use precinct Melrose Arch in Johannesburg. Nearly half of the 120 one-and two-bedroom apartments have been sold off-plan at prices from R1.85m to R6.7m.
Strauss says that translates into a rand per square metre price of an average R48,000, which is double the R24,000/m² average fetched for new Melrose Arch apartments during the height of the 2006/2007 boom.
A few other high-end residential developments are selling off-plan in Johannesburg’s northern suburbs in the R45,000-R50,000/m² range including The Houghton, Newcity Group’s Embassy Towers in Sandhurst and Central Square in Morningside.
At the new five-star Radisson Blu Hotel & Residence on the corner of Riebeeck and Long on Cape Town’s foreshore, 10 luxury penthouse apartments will soon go on the market at prices exceeding R70,000/m². That level was unheard of in Cape Town’s CBD until now.
Residential sales have also accelerated at the Rabie Property Group’s Century City, about 10km north of Cape Town’s City bowl near Milnerton.
The 10-year-old Century City development is SA’s largest mixed use precinct and home to mega mall Canal Walk, more than 500 businesses, 600 hotel rooms and close to 4,000 residential front doors.
Rabie director John Chapman says 106 of the 144 apartments in Waters Edge, the group’s latest residential development at Century City, were sold within the first week of launch at between R1,775m and R5,75m — or R32,000/m².
That is the first time that sales prices at Century City have breached the R30,000/m² mark and is substantially up on the average R20,000/m² at which apartments in the precinct were still changing hands 12-18 months ago. Two other recent sectional title developments at Century City, Matrix and Mayfair, sold out within an hour of their respective launches.
Says Chapman: “There has in recent months been a noticeable trend among jittery stock market investors to spread their bets to residential property.”