Throughout the South African property development and construction sectors, says Paul Henry, Managing Director of Rawson Developers, one of the most active of the Cape residential property development companies, those involved are having to introduce exceptionally tough price cuts which may - or may not - keep them in business for the coming year.
"Almost all building materials other than cement and cement-based products," says Henry, "have come down substantially. Three large aluminum suppliers have closed their doors in the last half year and the slow recovery has led to a price war."
"While we, as developers, obviously welcome the ongoing drops in prices, some of which in the boom era were far too high," says Henry, "it really does concern us that the future of many merchants and suppliers, many of whom have given good service over the years, are now threatened. Several we know of are working simply to promote turnover and move stock, not to make any sort of profit. This kind of situation can only last for a relatively short time."
Many of the professionals serving the construction sector, some of whom four or five years ago had more work than they could really cope with, are now, says Henry, without commissions and facing a future in which, despite being prepared to cut their fees drastically, simply cannot see any significant new commissions on the horizon.
Developers of multi-unit sectional title schemes like Rawson Developers, says Henry, have learned over the last few years to be very innovative - probably more so than in any stage in the last decade.
"What we have learned about cutting costs," says Henry, "is of course very valuable and experience has shown that redesigning units to make them even smaller can be done without their losing their appeal. We have also learned to source less expensive substitute materials, some of which are very attractive. In addition, certain tasks have been deskilled so as to make them less expensive. However it has to be recognized by the government, which theoretically believes in homeownership, that the 70% decline in home unit deliveries is not at all healthy for the country. Those of us in touch with the less affluent areas in and around the big cities know that urban and township overcrowding of residential units has now become a national problem - which only increased homeownership can solve."
"Market lethargy caused by job losses, low salaries and a lack of bond finance has," said Henry, "slowed home delivery and home buying down to such an extent that the unemployment rate in this sector is now very serious. Rawson Developers recently placed an advertisement for a quantity surveyor and received more than 150 applications from qualified people.
"Never in my experience has the situation been as bad as this"
For further information contact Paul Henry on 021 658 7100 or email paul@rawson-developers.co.za.
