 |
| Property Exposure Climbing |
|
 |
 |
 |
Many of South Africa's pension funds are now starting to bulk up their exposure to property, as they can no longer ignore the spectacular comeback that commercial bricks and mortar has made over the past two to three years
In the 90s, most institutions and pension funds were getting shot of large chunks of their property portfolios. Property - both directly held and listed - was generally rated as the worst asset class to be in back then, as an oversupply of commercial space kept a firm lid on rental and capital growth.
Subsequently, institutional investment in property as a percentage of total assets dropped from an average of 10% in the early 90s to less than 4% a decade later.
But it seems times they are a-changin', to quote Bob Dylan.
|
 |
| Social Drivers Affect South African Property |
|
|
|
|
Last week Prof Francois Viruly of Viruly Consulting gave his opinion on the impact of economic drivers on SA's property market, this week he explores how social drivers affect it
Last week Prof Francois Viruly of Viruly Consulting gave his opinion on the impact of economic drivers on SA's property market, this week he explores how social drivers affect it.
This brings to the fore the question of whether we are going to see more high or low-income areas in townships," he says.
Viruly says that many years ago he confidently divided people into those associated with commercial property and those associated with residential property. "Increasingly these markets are getting closer and closer. The Melrose Arches of this world are examples of where these components are integrating.
"The next issue we have to ask ourselves is how will we start with this in townships? Are we going to move into the next frontier which is going to see townships with swimming pools and more amenities? I believe that we will see a middle class in the township environment and I wouldn't be surprised if we move into that particular direction, i.e. a complex with a swimming pool."
|
|
| South African Property Feels Economic Drivers |
|
|
|
|
Economic drivers seem to have a big impact on South Africa's property market
So says Prof Francois Viruly of Viruly Consulting, who adds that we have a changing environment around us from a property perspective.
"Our inflation rate is 6% and our gross domestic product (GDP) growth is 4% to 5%. But that's not that interesting. Stoep talk is interesting or anything you can't find on Google."
On an economic level, Viruly says a few large institutional investors previously determined what happened in the property market but that that has changed fundamentally.
He also points out that the new cities of gold are not places that people would normally associate with a booming property market, but that that is where they go wrong. "With the way the platinum market and commodity prices are going at the moment, the cities of gold are critical and do matter."
|
|
| Residential Prices Outrun Rentals |
|
|
|
|
Residential rentals have not remotely kept up with house-price growth over the last few years
According to surveys conducted by Rode & Associates, rentals of flats, townhouses, and houses generally grew at a compound rate of roughly 4–8% over the last three years. This should be contrasted with a compounded national house-price growth rate of 19,3% p.a. over the same period. The result of this divergence in growth rates is, of course, the low net-income yields of 4-6% that residential investors currently face.
On the positive side, however, residential rentals did generally beat consumer inflation, which averaged about 4,5% p.a.
Some of the better-performing markets included the Durban house market where rentals grew by 12,9% p.a., Port Elizabeth’s flats (11,2%), and Bloemfontein’s townhouses (10,4%).
|
|
| South Africa Set to Follow International Worst Practice |
|
|
|
|
A report presented recently to Cabinet on the development of policy on foreign land ownership is sure to draw much public debate
Following the recent, long-awaited presentation to Cabinet of a report on the development of policy on foreign land ownership, Cabinet has now called for a comparative analysis of policy in other countries to be included in the report before it is submitted for wider public debate.
Ranging from recommendations dealing with a total moratorium on the sale of all land to foreigners, to the more tempered suggestions that special ministerial approval be sought in cases where certain categories of land are considered for disposal, the report - when it goes public for debate - will include "examples of international best practice" according to government spokesperson Themba Maseko.
|
|
| Foreign Buyers Do Not Influence Affordable House Prices |
|
|
|
|
Sales to foreign investors of free market properties can influence top end property prices, but have no effect on the affordable end of the market
So says Barak Geffen, Executive Director of Sotheby’s International Realty South Africa who says statistics from South America’s property market shows despite high average house prices, foreign investors do not affect the price of affordable homes in that market.
Figures show Brazil’s shortage of affordable housing is far worse than SA and growing.
“Brazil has government legislated financial mechanisms in place to relieve pressure and build more affordable housing.
“About 20% of its wage bill is put into a UIF fund and of which 65% must be spent on housing either directly by providing home loans or by lending to developers.
“Brazil’s population is about 185 million and the shortage of formal housing stock is about 8-million housing units or 14% of the total market requirement. In South Africa where the population is about 44 million we have a shortage in this segment of 2,6, which is acute but not as bad as the Brazil model.”
| Sotheby’s International Realty, 13-08-2007 |
Read more |
|
|
|
| Major Facelift for Johannesburg |
|
|
|
|
Plans in pipeline for high-rise blocks in posh neighbourhoods
The plans, tabled in three proposals before the Joburg council late last month, under the Urban Development Framework document, have been put in place to ensure the success of Gautrain and the city's R2-billion Bus Rapid Transport System.
The documents contain the council's vision for Sandton, Rosebank and Marlboro, all of which will have Gautrain stations. The plans, which were passed by the council, will now be subject to a public-participation process at a council sitting on July 26.
|
|
Will the commercial property development boom be halted by the uncertain interest rate environment
Property analysts do not think so, saying any additional costs from a rising interest rate environment will be passed on to prospective tenants by developers raising rentals.
Because there is a shortage of vacant space in the commercial property market, tenants will also be forced to accept increased rentals as they do not have many options when it comes to finding suitable unoccupied space .
The commercial property market has been experiencing boom conditions over the past few years, with property values increasing dramatically. Demand has mopped up most vacant space and sparked an increase in new property developments coming to market.
|
|
| Longer Delays For Developers |
|
|
|
|
Developers could face longer authorisation delays following a court judgement that emphasises socio-economic factors and gives ammunition to objectors
John Loos, property strategist for FNB Property Finance, is of the opinion though that this judgement will not have much effect on developers.
A recent Constitutional Court judgement, the Fuel Retailers Association of Southern Africa case, has highlighted the need to separate town planning criteria from environmental decision making dealing with the "sustainability" of a development and its impact on social and economic factors.
"In addition, the judgement looked at the legitimacy or otherwise of the practice of trade competitors who tend to lengthen the authorisation process by raising environmental objections for other than ecological motives," comments Glendyr Nel of Shepstone & Wylie Attorneys' environmental law department.
|
|
| Cape 2010 Stadium Plan Wins Approval |
|
|
|
|
A special sitting of the Cape Town city council has approved the final building plans for the city’s 2010 World Cup soccer stadium in Green Point
With tight deadlines facing the city, construction is already five weeks ahead of schedule, but the city is still being haunted by a legal challenge from activist group, the Cape Environmental Protection Agency (Cepa).
The challenge seeks to review the legality of the various provincial and council decisions taken in the lead-up to secure the new stadium site on the Green Point Common.
The hearing was "indefinitely postponed" after it was found the scale and complexity of the case and the work, which had to be done before it could be heard, meant that lawyers would not be ready on August 13.
|
|
|
|
