A weakening of South Africa’s services-related industries, as well as a downswell in overall business confidence, has driven mediocre growth in market rentals of office space, with office rentals in Johannesburg and Cape Town demonstrating “lacklustre” growth of 6% in the second quarter of the year, property consultants Rode & Associates CEO Erwin Rode has asserted.
In his latest Rode’s Report on the South African Property Market, released on Monday, the property-focused economist noted that, similarly, commercial rentals in Pretoria increased 5% over the period, while office rentals in Durban were only able to muster growth of 4%.
Looking to the industrial property market, Rode reported a stronger showing, but cautioned that, until there were sustained improvements in the manufacturing and retail sectors, “no magic should be expected from the industrial property market”.
During the quarter under review, rentals in the industrial agglomerations of Durban and Port Elizabeth showed the strongest growth of 9%, while, on the Central Witwatersrand and the East Rand, industrial rentals were up 5% and 0.4% respectively.
Industrial rentals in the Cape Peninsula, meanwhile, contracted 1%.
“Over the same period, building costs are expected to have shown growth of roughly 11%, implying that, in all these areas, rentals actually contracted in real terms,” he commented.
Rode further noted that, in the residential sector, house prices and rentals showed little vigour.
He attributed this to low levels of employment, stunted disposable incomes, high levels of household debt, tighter credit standards, and contractions in the number of mortgage loans granted.
“Flat rentals nationally also remained rather flat, which is no surprise in light of the persistent financial pressure that many households are under,” he held.
In the second quarter of the year, nominal market rentals on flats and houses grew by 5% and 4% respectively, whereas market rentals on townhouses posted growth of only 3%.
With consumer inflation of about 6%, this implied that, in real terms, residential rentals were still contracting.