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The Affect Traffic has on Property Prices
Property24
6 June 2007
With over 13,000 new cars on the road each month, traffic congestion is affecting property prices in surprising ways.
With an annual urban growth rate of 6%, Johannesburg is one of the youngest and most rapidly expanding cities in the world. Strangely enough, even though a relatively 'new' city, it lacks the modern traffic conveniences of modern counterparts.
Likewise, property developments seem to be at odds with existing infrastructure. "Golf estates, malls and office blocks are being churned out by the dozen and yet our roads and modes of transport remain largely unchanged," says Linda Erasmus, CEO, Fine & Country South Africa.
This growth is representative of things to come, which in itself is not a bad thing until you think about the affect it's going to have on traffic congestion.
Road rage
Traffic congestion has increased 26 percent since 1999 and the average travel time for commuters is roughly 72 minutes. Add 13 000 new cars on our roads every month, a few more years and even the most mathematically challenged can get an idea of the snarl up on the horizon. {Source: Integrated Development Plan}
"Regions like Fourways and Roodepoort in particular have expanded exponentially in the last few years, sending congestion in these areas into a tailspin. And yet more high density residential developments are planned for these zones in the near future," notes Erasmus.
Richard Gahagan, MD of Property24 agrees: "The Parklands debacle in Cape Town is another example of how an area has burgeoned beyond the capacity of the roadways," he says. "Traffic congestion is so bad in this area that buy-to-let investors are having difficulty renting out their properties as its simply not practical for anyone working in the city centre to live there."
The fact is commuters are spending ever-increasing amounts of their time and money on basic transportation costs. This is is influencing future transportation solutions and current property prices simultaneously.
All aboard
The current railway infrastructure is antiquated and covers only the older areas of Johannesburg in the south. None of the northern areas, including the key business districts of Sandton, Midrand, Randburg, and Rosebank, have any rail infrastructure whatsoever.
Enter the Gautrain, government's solution to traffic congestion on the N1 freeway between Johannesburg and Pretoria.
Ripple effect
"The Gautrain will not only alleviate traffic congestion but impact on property prices in surrounding areas," notes Erasmus, adding that the immediate reaction of many residents who lived near Gautrain zones was to move away. This was a move that could prove ill-founded as property values in these areas are likely to escalate due to their proximity to Gautrain nodes. Indeed, the 'out-flux' of private residents has created a gap for commercial developers.
"In some instances sectional title prices in Rosebank are already 25% more than Killarney for similar un-renovated buildings," says Erasmus.
Freehold titles close to the Gautrain development in Melrose have experienced a slight dip in value, but town planners confirm that applications for commercial use are up.
Growing interest amongst developers has also been detected in terms of residential refurbishment projects on the two main Gautrain routes. Related renewal is also likely to boost various other areas profiles such as Braamfontein and Marlboro.
Properties close to stadiums in all parts of the country have already seen huge price increases, some as much as ten-fold. This is a result of the anticipation of World Cup fever and a 'killing' from foreigner rentals, but also the appeal of being close to the amenities that these developments are generating.
In general, expectations in the real estate industry are that residential, commercial and even industrial property prices will increase as a result of the Gautrain. "However, residential properties situated right next to the tracks will probably experience a down-turn in property values," says Erasmus.
But first…
Until the Gautrain is a reality however, transportation costs will continue to affect property patterns in general.
"Travel costs impact on property affordability in that it influences how much a person can realistically spend on a bond and utilities," notes Erasmus.
Area and position have also become increasingly important in terms of proximity to work. So much so in fact that people are snapping up homes in more expensive areas of town simply so that they can be close to their jobs. Congestion has already forced many executives to do just this.
Erasmus concurs. 'Lifestyle plays a huge role. Many executives own a house at for example, Hartebeesport, where they live with their families on the weekend. During the week however, the executive overnights in an apartment in Sandton.' Traffic congestion has therefore indirectly driven the market for second and holiday homes, a market which is increasing exponentially each year.
A short fuse
Yet another factor influencing prices and demand patterns to emerge of late is a lack of power supply. Midrand, Bryanston and Sandton are cases in point.
Power bottlenecks have even caused a moratorium to be imposed on the area surrounding Hendrik Potgieter in Ruimsig. No new builds are being permitted once existing contracts have been fulfilled.
Indeed, this inability to provide basic amenities may well impact on future development costs and buying trends. Poor service delivery has already impacted on present builds as developments approved three or four years previously simply cannot go ahead.
Fundamentally therefore, there are a host of new factors influencing the current property market, which buyers, sellers, estate agents and developers alike need to take into account.
Original article published at www.property24.com.
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