Rode’s property news
While the slow-down in building activity in the residential sector has been expected, recent statistics for non-residential property have surprisingly shown that this sector is also now beginning to weaken.
The growth in retail sales has been losing steam for some time now, with the figures for May 2008 revealing that real sales (actual volumes of sales) were down by nearly 4% on the same month a year earlier.
In the midst of all the doom and gloom in the South African residential property market, commercial and industrial markets are still booming according to the latest issue of the Rode’s Report on the South African Property Market.
While the South African economy may be taking strain on all fronts, a ray of hope can be seen in office rentals in the decentralized regions of Johannesburg, which have continued to fare well, according to property economists Rode & Associates.
This time last year, things looked rosy for South Africa; the country’s top economic experts were forecasting robust growth of around 5% per annum.
Property economist Erwin Rode of Rode & Associates has strongly condemned Eskom’s decision earlier this year to impose a six-month moratorium on all new medium- to large-scale construction projects across both the residential and non-residential markets.
Capitalization rates — the property equivalent of the forward earnings yield of shares — have remained put despite a deteriorating inflation and interest rate outlook.
There is much debate currently among property experts, with one camp predicting a continuing downward spiral for the foreseeable future, while the other maintains the current scenario is a bump on a road that will soon head skywards once again.
Just as prime office rentals currently lead the pack in decentralized Johannesburg with 23% growth on the previous year, so too is this area leading the pack in committed new office developments.
Although survey results from the last quarter of 2007 do not yet show it, capitalization rates for non-residential properties are more than likely under pressure at the moment, says Erwin Rode of property economists and valuers Rode & Associates.
Prior to the recent paralysis of the mining industry, most South Africans probably did not fully appreciate the extent of the country’s electricity problems and the implications they hold for the economy — and hence the property market.
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