Property investor trends

Absa bank head of lending, Michael Mortimer, says the forecast in the commercial property sector is looking better in June 2012 compared with a year ago.

Pieter Steyn, Absa’s head of commercial property finance (CPF) says the bank is viewing the remainder of 2012 for the sector with renewed optimism “while treading cautiously” amid expectations of continued upside inflation in the year ahead.

Absa’s property analyst Jacques du Toit and his colleagues maintain housing affordability will remain key in the year ahead on the back of low house price growth and low interest rates. Du Toit says while disposable income is growing, many households are unable to benefit from this because of the state of their finances and credit records.

In this regard, he says smaller and higher density properties, like flats and townhouses are the future of housing in South Africa. This is especially true in major metropolitan areas partly because of the availability and cost of serviced vacant land for development, the affordability of housing and housing finance, operating and transport-related costs.

Another area in which growth is expected is in townships where some developers have already made inroads. The question has often been asked why developers are not moving into these nodes by establishing office and industrial space. In Soweto, south west of Johannesburg for example, tens-of-thousands of workers commute to the Johannesburg CBD and surrounding suburbs daily. Strikes and industrial action often paralyse workers trying to get to work, costing the economy millions.

Du Toit says this sector shows significant potential.

Another market which is promising is Africa. Steyn says: “While property development and investment on the boarder African continent does pose numerous challenges of its own there are undoubted opportunities as well, and we are committed to supporting our clients with their African expansion plans.”

Steyn says Absa is particularly well positioned to do so through its Barclays footprint across the continent.

Steyn says given the relatively new retail development offerings currently available in South Africa, many developers are looking at the rest of Africa.

He says the office sector remains the most challenged of all the property sectors. “With national vacancies having increased for four successive quarters and now breaching 10%, the sector remains under pressure in various nodes.”

Steyn adds that inflationary pressures and the possible movement towards higher interest rates are expected to result in a slowdown in buying for this year compared to 2011.

Du Toit adds that interest rates are at their lowest level in more than 35 years and are likely to remain unchanged until late 2012. This will be on the back of global economic uncertainties and their possible impact on the domestic economy and consumer sector.

“Interest rates are expected to be on a gradual rising trend from late 2012 up to late 2013,” Du Toit said.

(Article sourced: Moneyweb)

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