Another factor that makes SA stand out is that contractual rentals generally increase every 12 months — while in the developed economies, contractual rentals increase only every 60 months. This makes South African property a far more attractive investment proposition from a cash-flow perspective.
Tony Bales, of commercial property deal makers Bales & Associates, said yesterday, 29 April 2010, that although the property market had experienced a tough environment of late, “looking back at the days when the prime interest rate hit 25.5% in 1997, the current situation we are dealing with is very mild”.
“While office, retail and industrial rental growth is under pressure and banks are not lending on favourable terms, at least interest rates are relatively low and the environment is stable and forecastable,” Bales said.
From here onwards, he said, the market was likely to see improvements rather than any deterioration of fundamentals. “Conversely, investors in the US, UK and Europe have had a disastrous 24 months, where huge value has been eroded off property portfolios and many banks are not in a position to lend at all.”
He said it was interesting to note that many international investors were once again starting to look at SA as an investment destination.
Bales believes that while local developers have been extremely quiet during the past 24 months, and are likely to remain so for another year or two, when demand for rental space does improve, it is likely to have a huge positive effect on existing vacant space and will no doubt drive up rentals “fairly” quickly.
“At this stage, South African property investors can sit back and be thankful they did not have to endure the roller-coaster ride the developed economies took. The medium-term forecast for commercial property is one of stable, albeit slow, growth into the next year or so,” Bales said.
Source: Business Day
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