Marius Halgryn, land acquisition and new business manager for Rawson Developers continues:

Sometimes, 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.

Citing the Cape Peninsula’s Southern Suburbs, Halgryn maintains that 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.

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 companies such as Rawson Developers have a better 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. eProp notes that owners should also carefully assess the suitability and time frame of existing zoning rights as this can negatively affect their rates and tax bill in the case where 'higher rights' are not effectively utilised.

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.