Mar 30, 2011
Commercial and industrial properties could be headed for a boomBack
Africa|Housing|Industrial|Africa|South Africa|Manufacturing|Manufacturing Sector|Erwin Rode|Gill Marcus|John Loos
© Reuse this
Speaking at the launch of the Rode’s property report, Erwin Rode said office and commercial renting prices had reached the bottom of a trough and were expected to climb in coming years if the country was able to maintain a financial recovery.
“Office and industrial spaces are currently dirt cheap and we anticipate that properties could significantly rise in value for many years to come.”
In 2010, office rentals showed a 6% year-on-year recovery, while the industrial property market had also started to smooth out, mostly on the back of a recovery in the country’s manufacturing sector.
However, Rode believed that the government’s New Growth Path, which has a strong emphasis on boosting the manufacturing sector, would not have a significant impact on the industrial property sector in the shorter term, or up to 2015.
FNB property economist and strategist John Loos said rising bond yields and a lack of progress in reducing commercial and industrial vacancies in 2010 suggested a rise in capital rates in 2011, which could see slow movement in these sectors during the year.
However, he agreed with Rode that improving fundamentals such as a slowdown in building activity and a decline in vacancy rates, could support strong growth by the next cycle of interest rate cuts, which he predicted could come round by 2014.
In comparison, the Rode’s report showed that residential properties had been highly overpriced for years and only showed a mild dip in historically high prices during the recession.
Rode pointed out that this indicated that housing prices were set to decline in real terms.
Loos added that the country’s consumers were saddled with extremely high debt burdens, which would become even heavier as inflationary concerns grow and interest rate hikes are set to come into play.
Current interest rates at 9% in South Africa were last seen in the 1970s. This had also assisted in the “mini recovery”, as Loos referred to it, experienced in the property market during 2010, compared with the previous year.
But, Loos warned that such a recovery could be short-lived as rising inflation pressures increase the risk of rates hikes by the South African Reserve Bank.
“We have seen global inflation of 33,7% in food prices and around 32% in oil prices, and Governor Gill Marcus has in recent months warned that this would also have an impact on South Africa’s economy. But, I do believe that the central bank will be mindful before hiking rates, and we expect a hike of about three percentage points by late 2011.
“All-in-all, 2011 looks set to be a year of slowing economic growth, on the back of rising commodity prices and increased central bank tightening, globally,” he added.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
South African State-owned defence industrial group Denel has announced its fourth consecutive year of profits. The group's results for the financial year 2013/2014 were recently announced at its head office in Centurion, south of Pretoria. Revenues grew by 17%, net...
There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
The National Association of Automobile Manufacturers of South Africa (Naamsa) has announced the event dates of the 2015 Johannesburg International Motor Show (JIMS). The event will take place from October 14 to October 25, 2015, at the Johannesburg Expo Centre, Nasrec.
UK engineering support services provider Babcock is set to deliver the largest order of global truck manufacturer DAF’s truck tractors in Southern Africa to bulk carrier road-based logistics company Ngululu Bulk Carriers (NBC), with 133 trucks to be delivered in...
Digital radio communications in the African local government space can open up the world, but have many challenges to overcome, notes integration and migration of legacy radio communications infrastructure with digital mobile radio company Emcom Wireless head of...