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Monday Apr 16, 2012

Property developers hunting for land in Cape Town's southern suburbs

Those people, like himself, who are involved in Cape Town residential property development and tasked with finding new land and new business opportunities frequently find that the huge development potential of certain areas is simply not understood or recognised by the owners, says Marius Halgryn, land acquisition and new business manager for Rawson Developers.

Sometimes, he says, the property with potential may have been in the family for generations without their even knowing how it is zoned.

In other cases, the potential may be recognised but the owner, lacking the resources to develop on his own, simply sits tight without a clear goal.

Especially in the Cape Peninsula's Southern Suburbs, said Halgryn, there is now so drastic a shortage of land for development that the only way to acquire a site is to buy up four or five houses which can then be demolished and their sites consolidated to make one large property.

In general, he said, companies like Rawson Developers look for high demand areas for their projects, in particular suburbs popular with young couples and singles, especially students. Such sites tend to offer the best potential returns. (Rawsons has recently developed three projects in Rondebosch to cater for this kind of demand.)

If a project sells slowly, said Halgryn, the return on the high purchase holding and construction costs can easily make it non-viable. In today's market, therefore, quick sales are a "sine qua non".

"Two further considerations currently govern the search for new land purchases - firstly, developments of under 25 units (on less than 2 000m² of land) are likely to be non-viable. However, secondly, Rawsons (and others like them) regularly need quick selling smaller projects to "plug the gaps" between the large projects."

It is, he added, a mistake to believe that Rawson Developers have a superior ability to get land rezoned fast, "This is simply not true. It takes us as long as everyone else." In most cases, therefore, he said, his directors and he look for land already zoned GR4 (General Residential). On occasions they do take on land zoned differently and work through the long rezoning process - but the holding costs in these instances can be high.

Often, adds Halgryn, an industrial or an office building might be suitable for conversion to a residential complex - and the owner may never have realised this.

Although it is not a general practice, many developers, said Halgryn, will on occasion enter into a joint venture agreement with the land owner rather than buy the property outright. In such deals, the return is likely to be higher, although the partner may have to wait two or three years for it.

"Although we do not want to cause a flood of new proposals, most of which will inevitably be undevelopable, we are keen to liaise with land owners, brokers and others who have (or have knowledge of) potential residential sites. Like most residential property specialists we are also able on occasion to take on retail/commercial projects, e.g. small buildings which are due for an upgrade."

Rawson Developers Press Release

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