Will golf estates in the winelands become white elephants?
05-12-2005
With house price growth cooling down fast and given the plethora of golf-and-lifestyle estates in the Western Cape, developers of such recent estates could be wondering if they might find themselves stuck with white elephants.
An analysis of trends in stand prices in the golf-and-lifestylee-state market in the Cape Winelands, just completed by Rode & Associates for the developers of Val de Vie wine-and-polo estate in the Paarl valley, has revealed an increase of 6,1% in the selling prices of stands between the second quarter of 2004 and the second quarter of 2005. No evidence as yet has been found that the upward trend in prices has been broken, and taking factors of demand and supply into consideration, the Rode team found that investors in Val de Vie could expect above-average long-term growth.
The study did indicate that the number of sales in the sample estates has come down significantly since the fourth quarter of 2004. In the second quarter of 2005, the median price came down slightly compared with the first quarter, but prices were on average still significantly higher than in the fourth quarter of 2004.
Rode & Associates CEO Erwin Rode says that not too much should be read into the slowing-down in the number of sales, as it could possibly be attributed to the sales drives of the developers coming close to their end because the stands were effectively sold out. Furthermore, it was found that most of the transactions in the past year were in fact re-sales, probably by speculators, and that could possibly have had a slightly detrimental effect on price levels in the second quarter.
The fact that the upward trend remains unbroken is more significant than the slowing in sales.
While unaffordibility is a major factor in the slowing of house prices, it is not likely to have a major impact on the golf-and-lifestyle segment of the market.
"As long as the economy keeps growing at 4% per annum, and interest rates remain structurally low, the very rich will keep on doing well."
Future supply is likely to be limited by political decisions such as restrictions on new golf-and-lifestyle developments on the grounds of water scarcity and elitism, as well as heritage-preservation considerations in the Paarl-Franschhoek valley.
"Our conclusion is that the prospects for investors in the Paarl valley are similar to those of investors on the Atlantic seaboard of Cape Town. Little supply can be added, while demand keeps on growing in tandem with a growing super-wealthy class of citizen."
