Streaming issues? Report here
Africa Melane 2019 1500 BW Africa Melane 2019 1500 BW
Early Breakfast with Africa Melane
04:00 - 06:00
volume_up
volume_mute

Up Next: Breakfast with Refilwe Moloto
See full line-up
Early Breakfast with Africa Melane
04:00 - 06:00
Home
arrow_forward
Local
fiber_manual_record
Business
fiber_manual_record
Lifestyle

Buying or selling? Property market continues to recover in third quarter

18 October 2021 8:16 AM
Tags:
Property market
Property
Rode Report

Property economist Erwin Rode speaks to Africa Melane about the recovering property market.
  • SA property market continues to recover in third quarter of 2021
  • This was indicated by the further increase in listed property prices
  • However, property economist says the recovery is due to the market being 'undershot'
  • There is an oversupply of office space
© stockbroker/123rf.com

The Rode's Reports is a quarterly analysis of the state of the property market in South Africa.

According to the latest issue of Rode's Report, the property market in South Africa continued to recover in the third quarter of 2021. This was indicated by the further increase in listed property prices, boosted by higher global economic growth and better than expected company results.

Africa Melane speaks to Property economist and CEO at Rode and Associates Erwin Rode.

Have we emerged from the property slump that resulted from the Covid-19 pandemic and tough economic times?

It's a question of expectations. We know that markets tend to overshoot and undershoot, and the fundamentals are still pretty bad for just about all property types.

Erwin Rode, Property economist and CEO - Rode and Associates

So why are we seeing a recovery if it is still bad?

The reason we are seeing a recovery is that we have undershot previously. The market becomes very pessimistic and they overdo it and we are now finding equilibrium.

Erwin Rode, Property economist and CEO - Rode and Associates

The report found that the retail market is recovering well with the industrial property market in the best position when compared to other non-residential properties types. Rode explains the difference between industrial property types versus the office property market.

The office market is very speculative. People put up office properties without it being fully pre-let whereas in the case of industrial properties such as warehouses they are very seldom out up speculatively.

Erwin Rode, Property economist and CEO - Rode and Associates

So in this case, the industrial property market is closer to equilibrium at all times, he explains.

It goes a far way to explaining why industrial property has not suffered as much and is closer to equilibrium.

Erwin Rode, Property economist and CEO - Rode and Associates

While he says the main reason is the issue of industrial property being less speculative he offers another additional possibility.

It could be that retailers are going more and more for big consolidated warehouses in the metropolitan areas for distribution purposes - but I don't think that is the main reason.

Erwin Rode, Property economist and CEO - Rode and Associates

Office property market

The office property market on the other hand has suffered from an oversupply, he notes.

Is the impact on the office market from the work from home trend overstated?

Nobody knows for sure but all indications are that the largest part of the workforce will eventually come back to the offices. My best guess is that in the end, after the dust has settled...that there will be a need for about 10 to 20% less office space.

Erwin Rode, Property economist and CEO - Rode and Associates

He says this means the current 'very high office vacancy rates will increase further' over the next few years as leases come to fruition and expire and have to be renewed.

Office rentals are already about 10% below what they were one or two years ago.

Erwin Rode, Property economist and CEO - Rode and Associates

He says there was already an oversupply of office space in South Africa before the pandemic.

Residential property prices

House prices had a short sprint when the Reserve Bank lowered interest rates last year and that effect is now coming to an end.

Erwin Rode, Property economist and CEO - Rode and Associates

What is counting now more and more is the fact that your employment figures are terrible and salary increases have just about vanished if not decreased in many cases - so the fundamentals are really rearing their head.

Erwin Rode, Property economist and CEO - Rode and Associates



18 October 2021 8:16 AM
Tags:
Property market
Property
Rode Report

More from Local

More from Business

More from Lifestyle