Property vs commercial in space fight

Posted On Monday, 08 October 2012 07:42 Published by eProp@News
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THE commercial property market will increasingly need to compete against the residential property market for land, according to Francois Viruly, property economist and head of property studies at the University of Cape Town.

Viruly, in a discussion on property trends hosted by Improvon this week, said housing issues will only be resolved by creating large, dense developments that can compete against commercial property for land and investors.

According to Viruly, population demographics and increased urbanisation and transportation are the issues which affect residential property.

He said estimates are that by 2040 there will be 10million more people living in the Gauteng area and 1.5million more in the Cape Town metropolitan area.

"We tend to look at the world in little circles, like Sandton or Rosebank, but we will start working with property markets that are linear and that run along our transport corridors.

"The future of housing in SA cannot be building house by house. People will be commuting from Bloemfontein if that continues. The future will be high-density living."

Viruly said a study by the Organisation for Economic Cooperation and Development showed the average South African household spends 20% of its income on transport.

"This is because we have been building communities further and further away from metropolitan areas. People are spending more and more of their income on transportation.

"If we carry on building 40m² houses 40km away from city centres, it means people will not be able to afford to go home."

Viruly said South Africa uses four to five times more space to house the same number of people than do cities like London and Paris, because of urban sprawl. The problem, he said, is that municipalities can often not afford the infrastructure for such a widely dispersed urban population.

Sedise Moseneke, president of the SA Property Owners Association, said South African cities are "historically dysfunctional" - designed to have people live far apart and commute. Only when dysfunctionality is sorted out and the efficiencies, like transport systems, addressed, can urban sprawl be stopped and high densification of cities be achieved, Moseneke said.

"We have attempted high densification and we have seen it grow into a shambles in places like the Cape Flats, Mitchells Plain and Alexandra. So, if we want to go that route, we will need a better model," he said.

Viruly said high-density developments also offer retail opportunities.

"High-density living attracts enough people to create new nodes with retail potential," he said.

"High-density developments can compete, or get close to competing, against the commercial property sector. House by house it will never compete on the land value, but the large integrated developments can."

The way to bring institutional money back into residential is to create residential developments on a scale that creates an asset class that investors can interact with, Viruly said.

Source: BDL


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