March 30, 2011; Johannesburg: First National Bank and property consultants Rode and Associates today launched a report on the country’s property market that shows a gradual return of cautious optimism in the office and industrial sectors of the property market. The latest Rode’s Report on the SA Property Market states that capitalization rates strengthened (i.e. declined) marginally in the fourth quarter of 2010.
Despite still drifting lower, industrial rentals in the major conurbations managed to end 2010 on a better note.
No help for the ailing house market can, for now, be expected from lower interest rates.
According to the latest Rode’s Report on the SA Property Market (quarter 2010:4); office rentals were able to muster some growth, even against the headwinds of a slowing economy.
Disappointing, although not entirely unexpected, was the waning in overall economic growth in the third quarter of 2010.
It is easy to understand why building activity tends to track house prices. It has to do with demand and supply, and the profit margin of developers. Economists call it the price mechanism. In a free market, a deficit of supply relative to demand results in price increases, which pushes up the potential profit margin of developers, which triggers new supply, courtesy self-interested developers.
The latest Rode’s Report on the SA Property Market reveals that the upward march of office vacancies is seemingly losing momentum. This, says editor John Lottering, holds out hope for office landlords that market rentals will soon stabilise.
Great news for the Port Elizabeth industrial property market has been the resurgence, from the ashes, of new-vehicle sales.
After showing the strains of weak economic activity for a number of quarters, office vacancies in both the decentralized and CBD markets are seemingly levelling off.
A look at industrial vacancy trends shows that there is, as yet, no need for industrial property investors to panic and make friends with their bankers.