Blog categorized as News

Developers clearly expect South Africans to continue shopping like crazy if the 637.294m² in retail floor space to be completed during 2007 — which is some 20% up on 2006 — is anything to go by.

Strong economic growth and rising building costs and low vacancy rates ensured that the industrial property market kept up its grand performance during the last quarter of 2006.

The vacancy rate of prime-quality decentralised office space was down to 3,7% in the last quarter of 2006, from its high of 12% in 2003.

With property prices having soared over the last few years, it is understandable that home-owners are concerned that municipal property taxes will skyrocket with the next municipal valuation of their home.

In a landmark transaction, Absa bank recently bought 11 Diagonal Street in the run-down Johannesburg CBD for R104 million. It paid a further R20 million for the nearby West Street parkade.

If you invested in a rental unit in Toronto, Canada, you can expect an income return of about 4% in the first year, assuming the investment is not financed.

The growing wealth in South Africa’s leafy suburbs is now definitely trickling down to lower-priced neighbourhoods, including townships.

A comparison between the capitalization (cap) rates of regional, community, neighbourhood and convenience shopping centres in 1989 and 2006, indicates a decline in the margin between these cap rates.

The spread between leaseback and non-leaseback capitalization rates has narrowed noticeably in recent years, according to data surveyed by Rode & Associates’ team of property economists and valuers.

Contrary to popular opinion, interest rates are only one of various factors that play a role in determining capitalization rates.

So, if the Victoria & Alfred Waterfront is such a valuable asset, why weren’t local companies outbidding their foreign counterparts to keep it in local ownership?

While house-price growth in general continued to decline during the second quarter of 2006, the lower-priced section of the residential market grew at a faster rate than the middle and upper-priced sectors.

Shopping centres still seem to be shooting up all over the place with seemingly no end in sight

The housing boom may have peaked, but the good news on the property front is that office rentals are likely to double over the next few years, Erwin Rode, CEO of Rode & Associates said in his prognosis on the property market at the recent Rode Conferences.

Listed-property investors should not be too perturbed about the recent correction in share prices, as strong income-stream growth is likely to compensate them during the next few years as the upswing phase of the non–residential property cycle progresses.

Whereas most property commentators are predicting average house-price growth in excess of 12% over the next 12-month period, CEO of Rode & Associates Erwin Rode envisages single-digit growth in the region of 7–9%.

In contrast to what business schools have been teaching for decades, the hurdle rate is seldom used as an investment criterion when doing viability studies.

When looking at the history of industrial and office rentals in Port Elizabeth (PE) compared to the major cities in South Africa, it is evident that rental levels are far lower − so much so that they are below the levels that would make new developments viable.

The terms “capitalization rate” (or cap rate) and “initial yield” are frequently used interchangeably in the South African property investment environment. However, these terms are not synonymous.

In spite of sharply decelerating house-price growth, building-cost inflation is likely to continue to show robust double-digit growth during 2006.