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Construction Costs to Push Prices to 2010
Rodney Hayter
25 May 2007
The next boom in the property market with substantial price increases is likely to be in 2009/ 2010, and this will have nothing to do with World Cup Soccer fervor, said Keith Wakefield, CEO of Wakefields Estate Agents.
Speaking to 200 delegates at the company’s recent annual conference in the Drakensberg, he said the current rapid rise in building costs and lack of skilled labour was of great concern.
The demand for construction companies, skilled builders and building materials, as a result of major infrastructure development around 2010, has created huge shortages and was pushing up prices substantially.
Wakefield said that over the next two years the gap between new property and existing property would widen as building costs were spiraling at 20% a year while property prices were rising at between six and 15 percent.
“Not so long ago building costs were around R3 000 a square metre. Today building quotes are anything from R5 500 to the mid R8 000 a square metre or higher depending on the finishes,” he said.
“What this does is widen the gap between new and old property that had closed a year or so ago, and we are fast moving to a position last experienced in 1998,” said Wakefield.
“When prices move again this gap between new and existing property will once again pull together and I predict that we will be in for substantial increases again around 2009/2010.”
Wakefield also expected building costs to reduce again after 2010 once the capital projects related to the event had been completed.
Looking at the property market for the balance of 2007 and into 2008 Wakefield said he expected a further slight increase in interest rates soon “but nothing to get worried about”.
Market activity at all levels would remain buoyant for the foreseeable future because of the pent up demand from a growing middle class. However, price increases in the over R1 million bracket would be between six and 10 percent while those at below the R1 million level will be above 12 % he said.
During the conference Wakefield announced a number of new directorships to better manage the rapid growth of the company. A key appointment was that of Martin McGreal as sales director. He will be responsible driving sales, opening new branches and ensuring the performance of existing branches.
Other new directorships were Jenny Aitken, Marianne Bailey, Malcolm Madurai, Haydn and Myles Wakefield and Glen Elstob.
In the past year the company opened six new branches and sells some of the largest residential developments in the province – Zimbali, Pearls of Umhlanga, Cotswold Downs, Le Domaine, Somerset Valley, Hawaan Forest Estate, The Executive, Eagle Ridge, Royal Court, and Imbabala.
Original article published at www.rodneyhayter.com.
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