Developers' dilemma: build now or miss the boat

Whilst residential property developers were the first to experience the slowdown in the economy, they will be the first to benefit from the recovery. "The recession is having a dramatic effect on the development sector and in many cases the market has been brought to a stand-still," says Lewis Civin, MD of Redcon Property Development, who is developing Bartlett Green and Ravenswood in Boksburg, and who despite the economy is one of the few developers who are still operating.  "Most have land-banked their available land, or worse still, liquidated their holdings."

The dilemma facing developers is that it takes approximately two years to bring a project on to the market, ready for occupation. At this stage, they should be getting stock ready now, in time for the turn-around. In reality, this is not possible and two critical years of preparation are being lost.

Building merchants have not gone unscathed either.  They have been forced to stop supplying materials as developers are unable to raise development finance, as a result of unreasonable banking restrictions. Clearly, in the fullness of time, restrictions will be lifted.  But in the meantime, the number of developers that will be able to keep going under these difficult circumstances remains a moot point.  Civin remains optimistic about the future and believes that as soon as the market eases, and for those who have managed to survive, there will be great opportunities in that first two critical years of recovery.

"At present, there is still demand in the residential sector, particularly in the working class affordable market, an area in which we specialise. But the inability to raise bonds remains a stumbling block," he says.

At Park Square, one of Redcon's recently completed complexes, sales have slowed from 40 per month to fewer than 10. Rental enquiries, however, have increased dramatically.  So much so that the company has had to employ a third full-time agent to handle the rental side of the business indicating that that the demand for units remains unchanged.

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