Rode’s property news
The most recent residential property indices released by Lightstone indicate that the latest victim of the market downturn could be the one segment that has until now withstood the fallout.
The first law of investment is that returns are relative.
Cement sales, which have been declining since the beginning of 2007, continue to reflect the contraction in the building industry.
With demand for offices slowing down, a moderation in rental growth in this sector is a likelihood that must be considered. This is according to the latest Rode’s Report on the state of the South African property market in the first quarter of 2009.
During the fourth quarter of 2008, real GDP contracted by nearly 2% (annualized quarter-on-quarter), and the outlook for 2009 continues to look bleak. And you had better not expect any growth in 2009.
The last scheduled electricity load-shedding may have happened as far back as April 2008, but we’re not yet out of the woods, considering the thin reserve margin of Eskom – not only now but for many years into the future.
Growth in flat rentals, in areas such as Johannesburg, Pretoria and Cape Town, has for the past three years remained roughly in line with consumer price inflation (+9% p.a.) while in Durban (+12% p.a.) and Port Elizabeth (+11% p.a.) rentals even managed to marginally outperform inflation.
An interesting observation in recent quarters has been the acceleration in building-input-cost inflation, while building-contract-cost inflation has been decelerating.
Erwin Rode of property economists Rode & Associates has urged investors to exercise caution with industrial property, particularly in the short term.
Office- and industrial-property rentals continue to grow impressively, shows the latest issue of Rode’s Report on the SA Property Market.
Consensus seems to be developing amongst economists that the South African economy is going to decelerate sharply to a growth rate of about 3% p.a. over the next few years.
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