Construction was complete earlier this year and close to a full house of 141 units at the Paragon and 88 units of Madison Place had been snapped up by a market of savvy investors.

Urban renewal

The Paragon, Observatory. Credit: Gareth Griffiths

A Cape-based property development group has successfully reached their goal of bringing urban renewal to a formerly blighted strip of Main Road, Observatory properties south of the CBD.

With two completed developments and a few more in the pipeline, Rawson Developers is upbeat about the future and is constantly on the lookout for rundown buildings that could be more efficiently utilized, upgrading the area and helping to solve the accommodation backlog the housing sector is experiencing.

Carl Nortje, managing director of the company, says that while the value of development in the CBD was up by over 50% over 2016/2017, the south has also shown immense growth, not only in popular hubs, but places needing investment and rejuvenation. Observatory Main Road seems a good example, where a number of unsustainable commercial buildings have given way for new developments.

“These include our residential apartment blocks, the Paragon and Madison Place, conveniently situated across the road from the Groote Schuur Hospital campus and providing easy access to the CBD, V&A Waterfront and airport arterial route. We broke ground on the reclaimed Paragon site in late 2015, with Madison Place following in 2016. Both sites formerly contained run-down warehouses or commercial buildings,” says Nortje.

Urban Development Zone system
Development is encouraged both by the National Treasury and local government via the Urban Development Zone (UDZ) system. This was introduced by SARS to address the issue of urban decay within inner cities, maintain existing infrastructure and encourage investment in certain property – in line with prevailing government policy.

Supported by the City, this tax law provides an accelerated depreciation allowance on the costs of buildings erected, added to, extended or improved and which are within the urban development zones. According to SARS, at this stage it will run until 2020.

Nortje explains that all buyers who take transfer prior to 2020 may benefit from the tax incentive and thereby claim up to 55% of the purchase price as a tax deduction.

“The significance of the UDZ tax incentive has been huge for investors looking to rent out their investments in our apartments from first occupation. Combined with the substantial advantages offered by the safe, secure and trendy lifestyle that our developments are all about, has meant that both buildings were close to sold out by completion date” he adds.