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 44 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 occu ?????????????????????????????)I???????????q????????????????????)????????????????????????????????????)??????????????((0