Mar 30, 2011
Commercial and industrial properties could be headed for a boomBack
Africa|Housing|Industrial|Africa|South Africa|Building|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)
Other Video News
Updated 4 hours ago The Cape Town International Convention Centre (CTICC) has outperformed its targets over the past financial year and contributed R3.1-billion to the gross domestic product in the 2013/14 financial year. CTICC CEO Julie-May Ellingson said the convention centre had been...
Updated 5 hours ago Public Enterprises Minister Lynne Brown has released details of the remuneration of the chairpersons and nonexecutive directors of the various State-owned company boards falling under her Ministry. The remuneration figures, which are attached, are based on figures...
Updated 5 hours ago Installed wind power capacity could swell by 530% to 2,000 gigawatts (GW) by 2030, supplying up to 19% of global electricity, a report from a trade association and Greenpeace said on Tuesday. It said installed wind energy capacity totalled 318 GW at the end of last...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
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 road...
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.
This Week's Magazine
The broad-based black economic-empowerment (BBBEE) alignment process in the con-struction sector has begun, dur-ing which the sector codes of the Construction Sector Charter Council (CSCC) will be aligned with the revised Codes of Good Practice (CoGP), which come...
It is second time lucky for Toby Venter. Ten years ago he negotiated to buy the Kyalami racetrack, but “the deal did not materialise”.
Environmental solutions company I-Cat started construction work on its R22-million, 1 949 m2 environmentally sustainable office and warehouse facility, commissioned by I-CAT Environmental Solutions, at a launch event in October. The new sustainable I-CAT campus,...
Effective file synchronisation and sharing across an organisation’s structures can provide the basis for robust mobile-device and document management while maintaining proper backup, version control and content distribution. These are the lessons learned by complex...
Hotel group Carlson Rezidor currently holds the largest hotel pipeline in Africa with 30 hotels and 6 300 rooms under development. The hotel group develops and operates Radisson Blu in the upper upscale segment and Park Inn by Radisson in the mid-market segment. With...