Rode’s property news
The spread between leaseback and non-leaseback capitalization rates has narrowed noticeably in recent years, according to data surveyed by Rode & Associates’ team of property economists and valuers.
Contrary to popular opinion, interest rates are only one of various factors that play a role in determining capitalization rates.
So, if the Victoria & Alfred Waterfront is such a valuable asset, why weren’t local companies outbidding their foreign counterparts to keep it in local ownership?
While house-price growth in general continued to decline during the second quarter of 2006, the lower-priced section of the residential market grew at a faster rate than the middle and upper-priced sectors.
Shopping centres still seem to be shooting up all over the place with seemingly no end in sight
The housing boom may have peaked, but the good news on the property front is that office rentals are likely to double over the next few years, Erwin Rode, CEO of Rode & Associates said in his prognosis on the property market at the recent Rode Conferences.
Listed-property investors should not be too perturbed about the recent correction in share prices, as strong income-stream growth is likely to compensate them during the next few years as the upswing phase of the non–residential property cycle progresses.
Whereas most property commentators are predicting average house-price growth in excess of 12% over the next 12-month period, CEO of Rode & Associates Erwin Rode envisages single-digit growth in the region of 7–9%.
In contrast to what business schools have been teaching for decades, the hurdle rate is seldom used as an investment criterion when doing viability studies.
When looking at the history of industrial and office rentals in Port Elizabeth (PE) compared to the major cities in South Africa, it is evident that rental levels are far lower − so much so that they are below the levels that would make new developments viable, given the strong increase in building costs over the past few years.
The terms “capitalization rate” (or cap rate) and “initial yield” are frequently used interchangeably in the South African property investment environment. However, these terms are not synonymous.
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