Real Estate Investor Magazine South Africa July 2013 | Page 46
REDEVELOPMENT
BY ANGELIQUE REDMOND
Changing the face of
JHB’s inner city
F
AFHCO meets the challenge
ollowing on from the article on the mass
exodus from Johannesburg’s inner city,
to the suburban area, the questions that
remains is what will become of the inner city
now? Once a bustling hub of activity and a
renowned business district, can Johannesburg’s
CBD come back fighting? The answer lies in
the companies and people who are, building
by building, changing the face of the inner city,
and stimulating activity.
Enter AFHCO and it’s Chief Operating
Off icer, Renney Plit, who have numerous
successful projects under their belt, and many
more on the cards.
Johannesburg was one of the many cities that
faced massive urbanisation as people f locked
towards the city for work, swelling the number
of residents and creating a massive housing
backlog, which in turn created massive overcrowding and turned once lively, sought-after
areas into crime hotspots, such as Hillbrow.
Loren Landau, director of the African Centre
for Migration and Society at the University
of Witwatersrand, says: “While the rates of
migration may not be as high as some feared,
the growth rate when translated into absolute
numbers nonetheless represents an important
demographic and political challenge to local
authorities and others mandated to provide
for the urban poor.” Cities like Johannesburg
remain a magnet for migrants from inside and
outside the country and while the expected
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July 2013 SA Real Estate Investor
levels of growth have not happened, the city
is still growing at an estimated 1.9 percent per
annum, twice the national rate. “We’ve still
got a backlog in terms of addressing needs like
housing,” said Prof Phil Harrison, a member of
South Africa’s National Planning Commission.
“It might actually be a blessing if growth
isn’t as fast as was anticipated.” Investing
in the inner cit y is well worth it from a
f inancial point of view, Paul Lapham, the
chief executive of Citiq, explains: “ an innercity apartment purchased in 2000 would
have delivered capital appreciation of 11.5
percent (conservatively speaking) over the
“There is also the hope that
government and council
will become more engaged.”
past 12 years, while similar townhouses in
suburbs such as Greenstone, Halfway House,
Winchester Hills, Northriding, Olivedale
and Weltevreden Park would have generated
capital returns of 10.5 percent a year. All
property markets go through cycles. The last
six years have seen pedestrian and, in some
cases, negative growth nationally. In fact,
2012 was the year that saw the lowest number
of both inner city and suburban townhouse
sales since 2000. But, even during the slump,
apartments in the inner city of Joburg have
remained a solid investment choice, supported
by the city’s status as the economic hub of
South Africa.”
But what are the challenges?
W hile there are ta x incentives for inner
city redevelopment in terms of the Urban
Development Zone, which allows companies
to write off the cost of construction spent on
a project over a period of five years, this only
equates to 20% per annum. Renney Plit of
AFHCO explains: “ as great as it sounds, the
incentive does not drive inner-city investment.
The benefits of this tax write off with typical
returns investors are able to achieve, are very
long-term. After servicing the debt interest on
your project, you are not likely to see any benefit
from the UDZ for probably at least the first 5
to 8 years. So I don’t think many investors see
it as a real driver of investment decisions.” One
way forward for investors is for government to
review this allowance and come up with a way
to impact the short-term benefit for affordable
housing investors.
Another challenge faced by affordable housing
developers is anti-landlord or punitive legislation
coupled with a very slow and uncertain legal
process. There is a poor enforcement of home
affairs policies leading to a proliferation of
slum and hijacked buildings, many of whose
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