Property companies use the capital market instead of banks

According to Fin24, property developments worth billions will spring up countrywide over the next couple of years, thanks to favourable funding conditions. These days listed property companies are less dependent on bank finance and can use alternative sources, such as the capital market, to obtain finance for expanding and overhauling their portfolio. In the current economic climate the issuing of corporate bonds is certainly cheaper than bank finance.

Norbert Sasse, Chief executive at Growthpoint, the country's biggest listed property company, says that in the past year Growthpoint was more active on the development side than on the acquisition side because South African property is expensive compared with the cost of finance. The company achieves great success through the issue of short- and long-term bonds, which are strongly supported by investors, Fin24 reports.

In the year to end - June Growthpoint expanded its bond programme by R1.5bn, increasing its unsecured debt to 39% of its South African debt, while its unit price rose from R18.31 to R23. It has since climbed to a high of R26.99 per linked unit on August 29, Fin24 reports.

Read the full article on www.fin24.com.