Not a mat­ter of course

Suf­fer­ing with­out an eco­nomic sweet spot

Finweek English Edition - - Insight -

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

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