Multinational corporations will move their headquarters into the area in the next three or four years, making it SA’s largest commercial node after the Johannesburg CBD. As such, the surrounding residential areas are poised for an appreciation in property values and demand. However, this may be a double-edged sword.
Property price outlook
Sandton is a great example of developed and developing commercial nodes driving up residential property prices, all because of their proximity to work and entertainment amenities, says Herschel Jawitz, CEO of Jawitz Properties.
The old adage “location, location and location” will determine the effect large-scale developments will have on residential property prices.
The area around Grayston Drive, Sandton Drive, Rivonia Road and Katherine Street will be affected. Residential suburbs like Benmore Gardens, Parkmore, Atholl, Sandown and Inanda are strategically located, with the commercial district, Gautrain station and Sandton City a stone’s throw away.
Lightstone managing director Andrew Watt says residential properties near the Gautrain station have seen between “2-5%” in annual house price growth when others have fallen.
Higher rates and taxes
But while residential properties near commercial nodes are more expensive and more in demand, Sandton’s viability is a double-edged sword.
Managing director for commercial and industrial property consultancy Jones Lang LaSalle SA Craig Hean says there is
strong demand for residential real estate in Sandton, resulting in higher valuations and higher rates and taxes.
Rates are determined by the value of the property. Homeowners are already forking out a lot of money for rates and taxes. They will feel the pinch should property prices continue to rise.
For example Watt says if over a five-year period a property price doubles, property owners can only see the impact of a rise in property rates and taxes after a five-year review by the municipality.
Expansion of residential properties
Property developers need two things, says Watt, infrastructure approval and development finance. But banks are continuing to be cautious about lending.
The global financial crisis seems to have had a far-reaching impact on residential expansion plans. Ronald Ennik, CEO of luxury estates group Ennik Estates, says a number of residential areas were proposed for Sandton but fell through as the crisis unfolded.
Parkmore, for example, has the potential to be expanded and there needs to be a firm distinction “about what is residential and what is not” as demand for office space in Sandton grows.
Unless Sandton’s residential areas are expanded in tandem with its commercial developments, it risks becoming a place of work, “busy during the day and dead at night”, says Ennik.
Already there are concerns that road and traffic infrastructure are not expanding to accommodate the influx. Wessels explains traffic into Sandton will double in the next five years, which might be a deterrent for home buyers.
Ennik says homeowners have three options: staying put and embracing the developments in a bid to capitalise on the valuation of the property, moving out or renting.