Prop Investors cautioned over Coega spinoff

Posted On Friday, 02 June 2000 03:01 Published by
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Home owners and developers have been warned about being over-optimistic about the effects of the proposed Coega development outside Port Elizabeth on local house prices.

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Neil McLaggan, regional director of the Nationlink estate agency group, who notes that most local businesses have already 
begun figuring how to get their piece of the R10-billion boost the project it is expected to give the Eastern Cape economy "We are aware that advice to proceed with caution will probably not be the most popular message right now, but we believe it is correct, unless those in the Port Elizabeth property industry want to go through what happened in Richards Bay after the building of the Alusaf Hillside smelter''.

In 1994, when construction began on the R7,2-billion smelter, Richards Bay was flooded with contract workers and others hoping to cash in on new business opportunities arising from a burgeoning, employed population. Rentals shot up and so did home prices. Housing developers rushed in to build thousands of flats and townhouses, and even those with moderate salaries were "investing" in second homes to let out.

The town was billed as one of the country's hottest property spots. But, just two years later, the bubble burst. The smelter was commissioned and the contract workers began to head home. Rentals fell by more than 20 percent and home prices by even more.

And later that year, the market suffered another blow. Alusaf, Mondi and Richards Bay Minerals decided to sell off their company houses to staff. Those not taken up by employees were placed on the already swamped market. Prices fell again, and only now, almost four years later, are they beginning to breach the levels that were being achieved before the building of the smelter. 

And there is still an oversupply of flats and town houses, so even almost R4-billion worth of new capital projects in the area are not expected to bring about any sudden increases. "We in Port Elizabeth have an opportunity to learn from this scenario," says McLaggan.

"We should not be blind to the possibility that many of the 10 000 to 15 000 people that will be employed during the construction of the Coega harbour and industrial development zone may leave town once the project  is finished. "Consequently, we should discourage developers from rushing in and providing hundreds of new housing units in and around Port Elizabeth.

We should instead be focusing on the permanent employment opportunities that will be created in the harbour and as a result of new enterprises being established in the surrounding development zone in the years to come. "This is where a real vincrease in housing demand - and a steady increase in local property values - will come from''.

Last modified on Wednesday, 25 June 2014 20:11

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