Prospects Improving But Challenges Lie Ahead

Private Property South Africa

It would seem that certain sectors of the property market are well and truly on the brink of an upswing. So says Jaco du Toit, head of Park Village Auction’s property division. Says Du Toit: “Demand for residential property is definitely on the increase, most notably in some of the country’s most affluent suburbs which hints at an impending upswing. High-end buyers are usually pretty knowledgeable about property investment and tend to act when conditions favour them.”

Demand for commercial property on the other hand remains fairly weak amidst challenging market conditions which look set to remain for the rest of 2013 notes Du Toit. On the industrial and retail property front, he explains that property fundamentals are improving but that cost containment in these sectors may prove problematic going forward given rising labour, administrative and utility costs.

Interestingly, Du Toit says that a “boom” in the warehousing sector looks like a sure thing with demand for such property increasing rapidly which is good news for PVA given the number of such properties that regularly come the company’s way.

“It is interesting to note the uptick in activity in the various sectors,” notes Du Toit. “It indicates that investors are finally getting off the fence and are willing to invest once more. "Of course successful investment in any type of property is reliant on location, property quality and the ability to generate a sustainable rental income or long-term return on investment."

“And, while it has become increasingly apparent that tenants are prepared to pay a premium for efficient buildings in prime locations, it remains to be seen what the impact of looming municipal increases and operating costs will have on investor appetite."

“Pressure on disposable income, weak consumer confidence and difficulty securing finance will also no doubt impact the market. Suffice to say we at PVA are quite happy to ride out the last dregs of the storm and continue providing quality stock on all fronts.”

Roy Lazarus, CEO of PVA shared his thoughts regarding the current state of affairs and the property market. “On the face of it, it would appear that the worst of the economic crisis is over. For the first time in a long time, international growth prospects are beginning to look up and the various economic and government bodies are now beginning to embark on the slow process of rebuilding their economies.

“That said, there is still a long way to go before the global economy could once again be deemed ‘healthy’. It will take many years for the damage wrought over the past few years to be remedied, and there are many pitfalls which still need to be navigated. Of course, should there be another fallout in Europe’s debt-ridden countries for example, South Africa will not emerge unscathed given the country’s close ties to this zone.

“Locally, policy uncertainty, entrenched unemployment, political instability, pervasive labour unrest and a dwindling manufacturing sector are eroding South Africa’s social fabric and investor confidence. It remains to be seen what measures will be taken to improve this scenario. Many have adopted a ‘wait and see’ attitude until such time there is greater clarity on these matters.

“On the upside, it would appear that South Africa’s property market has now officially bottomed out and is really beginning to show signs of improvement. The fact that new building costs currently far outstrip the price of existing stock will undoubtedly play a role going forward.”

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