A large residential stand in one of Johannesburg’s older suburbs can look like an opportunity waiting to be unlocked. An owner might think of subdividing it into two or three properties, for example, and selling the surplus ones. Alternatively, they might consider rezoning a property situated on a major road and converting it into offices or a professional practice, especially if it can accommodate lots of off-road parking.
However, says FIRZT Property Group CEO Denese Zaslansky, owners and prospective buyers shouldn’t just assume that the development potential of a large stand will translate into easy profits. “There are many homes with very large grounds in older suburbs such as Bryanston, Hyde Park, Killarney and Saxonwold, where there are also no restrictions on subdivision in terms of the 2019 Spatial Development Plan for Johannesburg.
“And because many owners don’t want the inconvenience and expense of maintaining a large property any more, we are often asked what the prospects are for selling off some of their land. Our answer to that is that they should first find out whether the local authority has the capacity to service any new stands in their area, and then also investigate the costs of subdivision very carefully, because these can run into hundreds of thousands of rands.”
According to Craig Pretorius of Urban Terrain Town Planning, the first step for a residential subdivision is the preparation and submission of a consent-use application to the local authority. Once consent has been granted, though, it is likely that a number of professionals and processes will be required to ensure compliance with the conditions of approval.
“You will probably need to involve a town planner, a land surveyor to resurvey the property and register all the new boundaries with the Surveyor-General in Pretoria, and a conveyancer to deal with changes to the original title deed and the registration of any new stands at the Deeds Office. The estimated total of fees payable to these professionals is between R60 000 and R80 000.”
Next, he says, there may be significant infrastructure costs. “People sometimes overlook what is physically involved in creating another stand. Water, electricity and other services on the property generally have to be extended or rerouted, and new connections may have to be provided by the municipality. All of which could easily cost another R50 000 to R100 000.”
In addition, all owners who want to subdivide are required to make a contribution to the local authority for engineering services, including the provision of connections and meters to the new stand as well as additional road building or maintenance. This average around R80 000, Pretorius says - and takes the total cost of a subdivision in Johannesburg to between R200 000 and R300 000.
“For a homeowner considering selling, this is a vital calculation,” notes Zaslansky. “A large stand may appear to offer the opportunity to create two or three separate properties and increase the total selling price, but the owner needs to deduct the cost of achieving the subdivision, and think about the time and risk involved, before deciding to pursue this course.
“In many instances, it would be better for them just to sell their existing property as it stands and downscale to something more manageable if that is their motivation.”
The same principle applies, she says, to buyers who are considering the purchase of a large property specifically because they intend to subdivide it, build additional homes and sell them individually. “They should be aware that the purchase price is only the beginning of their investment, and that they need to factor all the costs of preparing and servicing the land into their feasibility calculations.
”But what about rezoning? Johannesburg also has many areas where owners may see potential in changing the use of an existing residential property to accommodate their business or professional practice, for example, or even for retail use.
Pretorius estimates that rezoning for such purposes could cost approximately R70 000 to R100 000, depending on the type of use envisaged and the associated municipal contributions that will be required.
“The nature and intensity of the proposed use can make a significant difference. A relatively low-impact office use will have fewer infrastructure implications than medical consulting rooms, which could generate greater traffic and water usage. A retail operation or motor showroom, for example, could have still greater infrastructure and traffic implications.”
As for rezoning a property to enable the construction of multiple residential units, such as sectional title apartments, this is best left to property developers, he says, as it can take years to accomplish, and the risks and costs are too high to make it worthwhile for most private owners.
The overall message for both buyers and sellers is therefore simple, says Zaslansky: Development potential has value, but unlocking that value comes at a price, so the most important calculation is thus not what the additional stands or new use could be worth, but what it would cost to create them.
