Not a matter of course
Suffering without an economic sweet spot
INVESTMENTS IN a second house, a beach cottage or a property on a golfing estate take off during a sweet-spot period in the economic growth cycle. And such investments evaporate just as quickly if things suddenly go wrong, like now. Currently, South Africa is full of property developments where nothing but a high wall and an imposing gate have been erected. The dreams of developers, investors – and also, apparently, banks – lie shattered among the overgrown stands inside the estate.
The prices of these so-called leisure and lifestyle property developments are apparently also the last to recover when business again begins picking up, my colleague Joan Muller reported in the Fin-week of 22 April. The absence of a new demand or wave of popularity for this kind of property development could even hold the danger more of them going the way of the Highland Gate Trout and Golf Estate in Dullstroom, where liquidators haven’t yet been able to attract a buyer. By the way, any tips from our readers about what and how you sell if a golf estate doesn’t make it? Investec and RMB will probably also be interested to know.
We – made up of a retired auditor, a property developer, a bank manager and yours truly – decided to play a round of golf at Euphoria last week. It was wonderful. They have an excellent, well-maintained golf course. The clubhouse is top notch. The professional conduct of the staff compares well with the best we’ve ever experienced at a golf club. Everything was wonderful, except that on Thursday there were only two four balls on the course. Only eight players on a course that needs at least 50 to 100 players each day to break even.
In the clubhouse many sales staff were very keen to sell us a stand or two. They weren’t shy about telling us what an excellent investment opportunity the stands were. The latest survey or report by the directors of the Euphoria Homeowners’ Association was even made available to us. It tells you not only about the homeowners but also all about the developer. The whole group there, under the leadership of Faan Erasmus, is really trying very hard to make all information available to current and future buyers. That’s to be welcomed and something other developers would be advised to emulate.
But the information contained in the survey also clearly spelt out the risks involved in an investment in a golf estate if the miracle period in the economy and the business environment passes over into a difficult time, as at present. Euphoria consists of 757 stands, with prices ranging from just under R500 000 to R2m for stands with a view over the mountains.
On 28 February this year, 402 of the stands had been sold and transferred to their new owners. That’s not bad for an estate only four years old. But – and this is where the big risk comes in – over the past year only three stands were sold. In less than three years, 399 stands were sold and in the past year only three. But that’s not the end of the troubles. Only eight houses have been built on the stands sold and two appear to be under construction.
Further evidence of the current hard times that have befallen golf estates is the R972 563 in arrears levies the new owners of stands haven’t yet paid. That’s almost
Need investors and players