Golf Estate property booming in South Africa

During the past five years there had been significant growth in the residential golf estate sector in South Africa.

So says Dr Andrew Golding, chief executive of the Pam Golding Property (PGP) group, who adds that "during this period, 50% of a total of approximately 30,000 residential golf estate properties – located within 66 golf estate developments – came onto the market in South Africa".

"Around 4,000 of these were sectional title properties. From a regional perspective these are spread in Gauteng (around 33% of total stock), the Western Cape (30%) and KwaZulu-Natal (16%). Naturally some of the older and well-established estates such as Fancourt, Erinvale, Camelot, Princess Grant, Mount Edgecombe, Dainfern and Centurion have been around for more than 10 years.

During 2008 prices paid for property in golf estates ranged from R350k – for land in less expensive estates – to over R10m, considerably up since 2005 when prices ranged from R265k for land in more affordable estates to around R5m for houses in more upmarket estates. Similarly the middle-price range paid for stock in 2008 was R680k to R2,5m compared with R500k to R1,3m in 2005.

Golding says while there were more than 5,000 transactions per year in 2005 and 2006, dropping slightly to approximately 4,700 in 2007, unsurprisingly sales volumes in 2008 fell – however, this trend follows a reduction in volumes in residential estates in general rather than being a trend simply in golf estates. Sales volumes for 2008 stand at around 1,700 - but this figure is likely to increase as more registrations filter through the deeds office.

"Bear in mind that there are in essence two distinct subsets of golf estates – those located within the major metropolitan areas and which have similar characteristics to suburbs within cities, and those catering primarily for the secondary market. The performance or price appreciation of the primary metropolitan golf estates has been very much in line with the metropolitan performance of that particular area and generally the adage that such a golf estate will perform better than the surrounding suburb still holds true – sometimes by as much as 25%."

He says for golf estates outside the major metropolitan regions the picture is different – these are characterised by an oversupply of stock both in terms of undeveloped land and built homes, where sellers are unable to sell these properties due to a lack of buyers. Here there is no particular product mix or offering that is achieving better results than the others in these secondary markets – whether fractional ownership, syndication, vacant land, corporate lodges or built homes, the market is depressed in all these sectors.

So what is the future of golf estates in South Africa? He says there are currently a number of trends or opportunities that prospective golf course developers and investors could consider. First - retirement space. This is one segment of the market that continues to grow and is undersupplied, and likely to remain so for many years to come. While it requires specialist knowledge it represents an excellent investment opportunity.

Then there is the hamlet trend, the emergence of small town South Africa whereby people are electing to live in smaller towns for lifestyle reasons and because of their ability to conduct their work – from a technology perspective – from home or even to commute from these areas.

"Many of these small towns have municipal golf courses, which I believe is an opportunity for the conversion of existing municipal golf courses into residential golf estates at a number of price levels in the market. The need not necessarily all be upmarket and perhaps there is an opportunity to tap into the middle class segment of the market through these municipal courses – both within cities and in the smaller towns of the country and which are within one to two hours' driving distance from an airport.

"There is also an opportunity to tap into international marketing opportunities in order to increase the current percentage of foreigners who purchase residential golf estate property. There are currently a handful of packaged opportunities for residential golf course developments which are fully zoned and ready to go to market or to be land-banked, ie. investing capital now for launching when the market recovers. I believe such opportunities exist certainly in Europe and the Far East, but also specifically in Africa, where large numbers of high-net worth African investors have already made significant investments in South Africa."

Shaun Ascough Group Managing Director of Cape Town prime property specialists, Sands Home Search comments: "Property in Steenberg Golf Estate in the southern suburbs of Cape Town is one of the most expensive places (per sqm) to buy property throughout the whole of South Africa. Demand remains strong for buyers wanting to buy in Steenberg Golf and Security Estate".

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