Should property developers build more big estates?

When it comes to gated estates, size matters. Sprawling estates spanning thousands of hectares with huge plots and resplendent with endless amenities and facilities have been quite the thing of late.

Estates such as Stonehurst Mountain Estate in Muizenburg in Cape Town for example, has about 300 homes spread over 100 hectares and offers extended lifestyle facilities such as walking trails, mountain bike routes, an onsite gym, and a restaurant as well as a swimming pool, bar, café, a children’s creche and meeting facilities for its community.

If one were to this ‘complete’ package with The Paddocks in Constantia – there are only six properties and no formal amenities. Instead, residents enjoy quiet and easy living with no real disturbances, no heavy security control load, and easy access to the management committee to address any immediate or pressing issues. Over the last few years, smaller estates like this have been springing up all over the country.

The two are as different as chalk and cheese but demand for both is high. So, where should developers be concentrating their efforts?

Knowing your buyer

Deciding which way to build will largely depend on the buyer you are targeting. As Stephan Thomas and David Burger from Lew Geffen Sotheby’s International Realty in Constantiaberg explain the demands and desires of a buyer are largely dependent not just on their purchase power, but also their age and needs, as well as things like the work-from-home and work on-the-go new norms.

‘The lifestyle equation can differ greatly amongst age and professional demographics. Larger estates that have the space for on-site facilities like restaurants and clubhouses are becoming increasingly sought-after as these venues are great for meeting people, business lunches, and family get-togethers,’ they said.

Thomas and Burger also add that the estate’s sporting facilities like gyms, also work much better for work-from-home families, as it means parents can take a break without having to leave the children and the estate and waste time driving to a gym.

Important to note is that smaller doesn’t mean cheap. Despite their size, smaller estates like Greenways Estate in Upper Claremont for example still have tall price tags. Housing only 13 manor hour apartments, six terraced and 12 bespoke plot and plan homes, prices range from R4 million to R16 million.

Choosing the right location

The biggest reason behind the rise of smaller estates is to do with location. Building a bigger development requires lots of land space and this usually means developers are forced to look further afield, outside of the main city metropoles.   

Buyers wanting to live closer to schools, shopping centres, hospitals, and business areas, are now opting for smaller estates that are closer to family and work.

‘We find that the bigger estates are golf estates like Steenberg for example, which require vast open spaces for the playing community. The cost of maintaining a professional golf course, however, does not come cheap and one must be dedicated to this pastime to make it cost-effective,’ says the duo.

Clawing back levies

The idea that more amenities mean bigger levies isn’t always true says Thomas and Burger. ‘While estates like Stonehurst Mountain for example suit a busier, more energetic lifestyle and, there is a greater need for security and access control, but these costs are shared more widely, across a larger number of residents,’ they explain.

To illustrate, an annual security cost of R1 million might only cost a household in a large estate R3,000, or R278 per month, which is far more manageable. Compare this to a major expenditure of R1 million in a smaller estate like the Paddocks, is only shared amongst six residents to the tune of R167,000 per household. Worse still, if one cannot pay, the burden on the other five increases by nearly 17%. From a financial perspective, it makes sense for developers to go big, and have a better chance of clawing back levies each month.