Friday, 1 October 2010

Airports let property markets take off

The development of airport infrastructure around SA is fuelling nearby commercial and residential property markets and while there are many who decry the effects of noise pollution, the impetus seems unstoppable.

So says Gerhard Kotzé, CEO of the ERA South Africa property group, who adds that airports and their expansion still generate mixed reactions, but there’s little doubt that the economies of surrounding areas benefit.

“South Africa, under the impetus of the Soccer World Cup and other influences, has extensively upgraded its airport infrastructure recently in terms of both international and regional feeder services.

“Unsurprisingly, the biggest investment of late has come from the Airports Company of South Africa (ACSA), which has now come to the end of a R17bn development programme, including the commissioning of spectacular new terminal buildings at OR Tambo International, Cape Town International and KZN’s King Shaka International airports among others.”

This kind of parastatal development is to be expected, he says, particularly in support of a major sporting event such as the World Cup but it’s interesting to note the private sector development of airports in recent years as well, including the major upgrades of Lanseria and Wonderboom airports.

“And new property development flows in the wake of these projects - in the case of Lanseria International for example, now Gauteng’s second biggest airport, a new R200m industrial estate with further investment of some R7bn over time is in the pipeline which in turn is expected to spark off additional residential development.

“Surrounding Wonderboom, a residential air park is being constructed along the lines of much talked-about developments of this nature in the US elsewhere in the world, while in the Welkom area a R3bn, three-phase development project including residential, entertainment, cultural and sports facilities is reportedly on the cards.”
Similarly, the development of King Shaka International north of Durban has definitely stimulated property markets in La Mercy, Umhlanga, Ballito and other north coast centres while in Mpumalanga, the Kruger Park

Mpumalanga International airport is credited with spurring all manner of economic activity in Nelspruit and beyond, Kotzé notes.

“Clearly there will always be those who avoid acquiring property in airport approach areas, but on balance it would seem the benefits of airport development for the property sector are very positive.”

Elwyn Schenk, Pam Golding Properties (PGP) area principal in Umhlanga, Umdloti and La Mercy areas, says the Umhlanga node north of Durban is firmly entrenched as the area of choice for residents, investors and commercial end users alike.

“Thus prices in the area have remained fairly stable during the difficult economic conditions. Part of the reason for this, we believe, is that the potential for the area has been enhanced by the King Shaka International Airport and the Dube Tradeport.”

Durban's north coast has all the ingredients to develop into a similar, but still different, version of Cape Town's Atlantic Seaboard.

“The mild and sunny climate year round, beautiful beaches – add to this the rapid growth of the Umhlanga node and proximity to Gauteng (one hour's flight) and you have all the ingredients for rapid future growth. While certain areas such as Umhlanga and Umdloti are heavily developed, there is significant coastal land still available for expansion, in particular La Mercy, 5km from King Shaka Airport, offers substantial potential.”

“Global trends have shown that areas in close proximity to an international airport benefit from sustained and rapid growth. Commercially the Dube Tradeport will serve as a catalyst for economic development which will see KZN emerge as a major SA business node, serving Sub-Saharan Africa and the Far East in particular.

Experience has shown that property prices, both residential and commercial, will benefit from these developments. Commercial demand will come for hotels, engineering and other industries which service the airport, such as food services and import/export companies.”

Schenk says apart from the normal infrastructural development around airports – fuel depots, catering services, maintenance etc. – history the world over has shown that a new airport in particular will bring substantial additional development in peripheral industries such as freight companies, import/export agencies and related activities. “Passenger services and hotels are also attracted to a new airport facility.”

“Thus airports bring in their wake a substantial permanent population, together with a transient population ranging from contract workers to every day tourists.”

The effects of these demographic changes on the property industry are profound, especially in the medium to long term. “The trend for big businesses to move from the CBD into the north has been evident for some years and Umhlanga has been a prime beneficiary of this.”

He says future expected trends arising from the airport area will be a demand for mid-price housing from the blue collar workers, a surge in rental demand for the same reason and an increase in investor demand.

Clive Greene, PGP principal in Ballito, says the King Shaka Airport has created positive sentiment in the market. "Rental enquiries have increased twofold."
He says enquiries on properties for under R1m in the vicinity of the airport have picked up. “Sales on these lower cost properties are selling well. Caledon estates are nearly sold out with over 100 units sold.

In Sheffield Manor Estates there have been over 50 sales in the last five months and Sheffield Manor over 100 sales in the last 10 months. Simbithi Estate continues to sell very well, offering a secure lifestyle for old and young families.

He says commercial development will definitely increase as land has been allocated around the airport for development and Ballito is starting to offer large tracts of land for commercial use. “This, in turn, will increase demand for more residential property. The future for this area in the medium to long term is exceptional.” – Eugene Brink

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