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One is increasingly seeing property investments being advertised as delivering ever-improving income returns as time goes by.

Double-digit rental growth in the non-residential market over the next few years, is one of the predictions made in the latest Rode’s Report, which contains surveys and an analysis of property-market data from the fourth quarter of 2005.

A few years ago, the prognosis for office buildings in the CBD of Cape Town was so poor that many a converter developer could buy derelict office space for next to nothing.

There are early signs that residential properties close to upmarket work opportunities are deemed more desirable than those further away.

With peak-hour traffic jams in metropolitan areas becoming worse by the day, it would seem reasonable to expect that the demand for residential units closer to work opportunities would be on the increase.

With municipal officials doing the rounds in some municipalities knocking on doors to collect data for new municipal valuations, many are concerned that rates will soon be skyrocketing.

Solid income-stream growth and marginally declining income yields are sending listed-property prices soaring, according to the latest Rode’s Report.

Common sense suggests that a sustained upswing, or downswing, in house prices should be followed by a synchronous movement in land prices. But how fast do land prices react to house price movements, and to what extent?

With house price growth cooling down fast and given the plethora of golf-and-lifestyle estates in the Western Cape, developers of such recent estates could be wondering if they might find themselves stuck with white elephants.

There is considerable anecdotal evidence that farm prices have risen faster in areas where restitution demand has been the highest.

There is a misconception in the marketplace that escalation rates are intended to compensate landlords for consumer inflation, and many tenants, when negotiating rentals, make the mistake of using consumer inflation as their yardstick.

The valuation fraternity has long observed the fact that owner-occupiers are generally prepared to pay more for properties than professional investors.

To determine the impact of the pending rise in interest rates on capitalization rates, one needs to distinguish between two types of movement: structural and cyclical, says property economist Erwin Rode of Rode & Associates.

Every now and again one hears of how cheap South African properties are relative to those of other countries. This “discount” is then used to motivate an imminent rise in South African prices or rentals.

It is not uncommon for property market commentators to confuse market valuations with, what Rode terms, fundamental or speculative valuations.

Industrial rentals continued to grow at double-digit rates in most of the major industrial conurbations during the second quarter of 2005.

Since 1998, listed property yields have closely tracked those of long bonds, implying that investors view these assets in a similar light. More recently, however, listed yields have dropped below those of bonds.

The Rode team recently did some calculations to establish what rentals investors would expect from new office developments in popular office nodes such as Bryanston in the northern suburbs of Johannesburg, and Tyger Valley, in the eastern suburbs of Cape Town, to make them viable.

Interesting implications can be derived from the fact that, according to Absa’s latest house-price indices, old house prices are currently only 5% cheaper than the prices of new houses.

Property economist Erwin Rode says that his light-hearted remark that from a purely financial point of view it would be smart to sell his home right now, rent for 5 to 10 years, and then buy another home, was premised on the lengthy period of the residential property cycle.