Abacus DIVISIONS March 2012 News !
With Government’s large infrastructure drive cheap building costs may become a thing of the past – Abacus DIVISIONS
With the government making a commitment to spend R 854 billion on infrastructure focused expenditure within the next three years, there is more than a fighting chance that the beleaguered building industry might recover from the current doldrums it finds itself in.
This is according to Org Geldenhuys, managing director of property management company, Abacus DIVISIONS, who said property developers should secure projects at current prices if they can – and should sieze any good building opportunities that arise, before building prices increase. “Right now building prices are 10-20% lower than prices charged by builders in 2009. We are also seeing an increasing number of developers buying stands and building properties due to the current pricing situation. In fact, if you were thinking of building, now is the time to do it. The only caveat is that developers must ensure that they choose a builder who is financially sound and will not go bust before completing the project – as a large number of builders are currently under financial pressure.”
But Geldenhuys did warn that with the government’s huge infrastructure drive, building prices would start rising during the course of the year.
According to this year’s budget, the treasury wants the Transport Department to focus spending over the next three years on maintaining roads, upgrading infrastructure, constructing municipal transportation and subsidizing public transport operations. Government and state enterprises are planning to allocate funding estimated at R262 billion over the next three years to the transport and logistics infrastructure.
He said the Route 21 Corporate Park had “witnessed a good run”, despite the rigours of the recession, with the office park management believing that the “last few stands available in Phase 2” will be sold during the course of 2012.
Commenting further, Geldenhuys said that, with the government’s commitment to infrastructure-focused spending, many builders currently struggling to stay afloat could get a “definite boost” from the enhanced “circulation of money”. “What we are likely to find happening is that as the government moves forward on its planned spending, many of the larger builders – who started to target smaller projects as spending dwindled after the 2010 Soccer World Cup – would now be able to refocus on the more substantial projects. This would reduce the competition we are currently seeing when it comes to small and medium-sized projects. Due to the lack of projects, smaller builders have been compelled to compete against larger companies – who have had to look for smaller pickings to stay afloat – or to turn a profit.”