Property slump hits Cape Town city centre

Property prices for upmarket apartments in the city centre are in a deep slump and the owner of one of the city's flagship developments - the highprofile Mandela Rhodes Place - is planning to sell off its residential holdings in the complex.

This comes in the midst of a global downturn in the property market, where in some cases, sectional titles in the CBD which previously sold for up to R28 000 a m² now fetched as little as R17 000 a m².

The slump has hit investors who bought in the CBD during the property boom and are now being forced to sell their apartments for less than what they paid for them. Some homeowners are losing hundreds of thousands of rand.

This comes as Eurocape, owner of Mandela Rhodes Place and the Taj Hotel, readies itself to release apartments it has held back for years.

Eurocape's asset manager, Andrew Delport, said it was releasing more apartments at Mandela Rhodes Place, the company's signature development, on a "drip" system, one or two at a time.

Prices would range from R1 million upward.

The Irish-SA development company effectively owns 62 of 180 apartments - some of which form part of a rental pool for the hotel and spa - all the retail and office space and the parking lot.

It was also selling 10 units at the exclusive Taj Hotel in St George's Mall, just opposite Mandela Rhodes Place.

However, Delport said the timing of the release of the sectional titles at Mandela Rhodes Place was part of a strategic plan.

"It was always an intention to sell the residential component of Mandela Rhodes Place.

"Any property owner would want to maximise its portfolio revenues..." he said.

A Johannesburg resident, who spoke on condition of anonymity, said his studio flat in Mandela Rhodes Place had been on the market for three years.

He bought the property a few years ago for just over R1.1m, R220 000 less than what the original owner paid for it.

"The market is shocking. This property's moved from one high-profile estate agent to the next and it's still not sold," he said. "Now all I want is what I paid for it."

Remax City Bowl estate agent Henry Voss said he has had to slash the prices of a host of apartments in the CBD, with the new buyers paying "considerably less".

This included a unit at the Fountains Apartments, with a price drop of R300 000, and apartments at The Adderley and The Icon, which dipped by R100 000 each.

Venter said he recently sold a sectional title at Quayside in De Waterkant for R1.6m - R200 000 less than what the owner bought it for.

"It's a reflection of the market as a whole. Property pricing is increasing by just 3 percent year on year.

"We're in a deflating market," said Venter.

While it was inevitable that the market would recover, people who needed to sell urgently would suffer a big financial blow. Voss said properties were also on the market for much longer, sometimes even for several years.

David Fish, an estate agent for the Dogon Group, explained there was a major oversupply of property in the CBD.

About six years ago, he said, there were practically no residential developments in the CBD, but then the market peaked and plenty of commercial buildings were redeveloped into residential blocks. There were now up to 70.

"This growth caused a huge and abnormal demand for property in the CBD, so prices became artificially high," he said. "People who bought back then paid too much."

Susan Watts, a general manager at Remax, said a "twist" to the slow transfer of sectional titles in the City Bowl was the average prices paid in the surrounds.

"Gardens sectional title average sales prices have remained relatively stable in recent years and are slightly up compared to the 2006 to 2007 figures," she said.

Another Remax agent, Steven Delit, said many of the new developments in the CBD "didn't live up to the sizzle".

"A lot of them were set up as tourist hotels and the returns have been dreadful.

"Occupancy rates are low across the board right now, and developments like The Icon are not achieving near what buyers were told they would get," he said.

Cape Times

Posted at 09:06AM Jul 27, 2011 by Editor in Cities and Towns  |  Comments[13]