Stability under duress

Private Property South Africa

According to FNB’s latest property barometer, the “solid performance” of the housing market is continuing with the average price of homes transacting at R960 570. But this indicator is slowing.

Park Village Auction’s Jaco du Toit, who heads up the company’s property division, says that the wind is being taken out of the market’s sails by a number of factors including the threat of another interest rate hike, prolonged strikes that are slowly but surely eroding SA’s socio-economic fabric, and a sluggish economy.

Another telling sign of the times is FNB’s latest building confidence index which is currently at 41, down 11 points from the first quarter – which means that about 60% of respondents are dissatisfied with prevailing conditions.

Commercial sector

Vacancies in the commercial sector remain stubbornly high amid challenging market conditions that look set to remain for the rest of 2014, notes Du Toit. On the industrial and retail property front, he explains that property fundamentals have improved to a degree but that cost containment in these sectors may prove problematic going forward given rising labour, administrative and utility costs.

“And with yet another large-scale strike in full swing, the potential for more unrest cannot be dismissed. If inflation accelerates, working-class households will be hit hardest as the cost of food and fuel will increase. Thus, any wage increases gained through strikes will be eroded, which could catalyse another round of strikes, Rand weakness, investor runoffs and inflation.”

Success in the suburbs

It’s not all doom and gloom though. There are pockets of confidence and growth and there are suburbs across South Africa that are performing very well. For instance, near “boom” conditions are being reported in Somerset West. Properties at this node are now reportedly selling for as much as R3-million and stock shortages are becoming a reality.

For the short- to medium-term, it is envisaged that the property sector will remain fairly stable. As for auction properties, Du Toit reports that demand for auction properties remains quite robust and that his company has auctioned a number of big ticket properties of late, including a commercial property in Mayfair, which sold for R12-million.

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