Worry Over Rental Growth

The information in this article is courtesy of iAfrica (Rental Growth Concern - 27 March 2009).

According to Rode’s Report on the SA Property Market for 2009, the global economic crisis is causing a slowdown in demand for office space. This, in turn, is causing concern over the moderate rental growth in the country.

John Lottering feels that there is no need for concern yet, as decentralised nodes in Durban, Pretoria and Cape Town are still showing nominal rental growth above the growth in rental costs.

However, the first quarter of 2009 also found that the economic times facing the retail trade has put severe pressure on the market. So far only Durban’s nominal rentals exceeded expectations, while Port Elizabeth’s poor performance showed rentals contracting by one percentage point mainly due to the difficulties faced by the region’s motor vehicle manufacturing industry.

Flat rentals were just as unimpressive when compare to consumer inflation with no relieve foreseen in the near future, even with recent interest rate cuts and the promise of more relief during 2009.

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Rate Cut Still Expected in April

iAfrica reports that it is unlikely that the Reserve Bank will cut interest rates before the Monetary Policy Committee meeting on 15 and 16 April.

Even though there are still a possibility of an emergency meeting before then, the urgency and utility is much less than in February.

Absa Capital expects the SARB to cut rates by 150 basis points in April, followed by 100 at the June and August meetings. These predictions are mostly in line with market expectations but the possibility of rates bottoming at 6.50% is not out of the question.

Apart from the direct relief these rate cuts will offer — whether you are struggling to repay housing bonds, motor vehicle leases, bank overdrafts or credit card balances — the future are starting to look better. This is according to an article that was published in the latest Pam Golding Properties Intellectual Property Magazine. The article also states that these rate cuts does not signal the end of the downward cycle that started in June 2006, but it certainly makes things easier.

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Western Cape Market Prices Hold – Sortheby’s

The Western Cape property market is looking up according to a recent analysis by Sotheby’s International Realty South Africa. The analysis shows that while the residential property price ranger recorded a 35% drop in turnover for the Western Cape market for the first 6 months of 2008 – from R12b-R8b – and a 45% drop in units sold – from 7500 units to 4100 units – average prices actually increase by 19% - from R1,67m to R1,99m.

According to Barak Greffen, executive director of Sotheby’s International, this increase can be attributed to a large number of transactions in the upper segment of the market, and less in the lower market. This led the data to reflect an increase in prices.

Last year saw some hefty sales, the most significant being a R24m Clifton sale, R24m Granger Bay sale and a R23m Bantry Bay sale.

During the last 3 months of 2008 over 100 units of property were sold for R476m in the Atlantic Seaboard at an average price of close to R4m. This shows that there was still demand for property in highly sough-after areas.

Greffen finished by saying that savvy buyers have been waiting for the market correction to pick up the top-end properties from realistic sellers at market related prices, in order to gear up for the next upward cycle in the market.

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