Blouberg developments take center stage in the WSB property market!

Blouberg developments take center stage in the WSB property market!

Blouberg has proven to be one of the most active development districts in recent years due to the area's illustrious beaches, natural beauty and land availability which has been attracting many developers and investors alike.

Over the years we've noticed that more and more purchasers looking to buy property along the Western Seaboard are electing to invest in new developments given the transfer duty tax breaks, access to the latest home technology and premium facilities that new builds generally offer.

Price ranges in these new developments typically vary between just under R1 million at the entry-level to R5 million at the high end, making it an attractive proposition for a broad spectrum of target markets such as first time buyers, retirees, investors and International "swallows" looking for a refuge from northern hemisphere winters.

New developments have been erected in quick succession over the past several years and the demand hasn't quite kept up with the rapid supply. Given that developers typically work on a roughly 15-20% margin, it doesn't give them much flexibility on their price points. As a result, many developers that haven't achieved a 100% sell out in their buildings have had to resort to renting the units out in an effort to cover their holding and finance costs. This in turn has caused an oversupply in the rental market which has seen rental yields come down as much as 20-30% over the last two years.

As a knock-on effect attributed to the oversupply situation, the second-hand property sales market has hit a ceiling as prices generally can't surpass the new build price points.

The great news for investors and property owners is that the imbalance is slowly starting to be corrected, however, with more developments in the area on the way, this increase in supply could aid in putting further pressure on both rental returns as well as sales prices in the years to come, especially if interest rates retrace back to an upward trend as hinted by Reserve Bank.

Given the above, we have seen many investors and homeowners electing to offload their Blouberg properties while selling conditions are still favorable.

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