Abstract
The global financial crisis has spread to South Africa’s economy and its
property market. The South
African economy is now in recession, its first
for 17 years. Unemployment is up, retail sales are down,
and the global
financial situation is expected to decrease the number of tourists.
The
economic downturn is reducing demand for commercial space in most property
segments. However,
the property market has not been hit as hard as in some
other countries.
South Africa’s real estate is a sophisticated
market, its exposure to foreign investment is limited, and it
has
experienced relatively low rates of speculation in recent years. Demand is
till relatively healthy, and
there is still a scarcity of high-quality
business space.
However, problems affecting the sector include weak
household demand, overly restrictive bank lending
practices and ongoing
power shortages. (Source: Colliers International).
Commercial property is
promising. The residential sector is mixed. In areas such as the Western
Cape,
high quality properties are increasing in value. But other areas
have been hit hard.
The South African government has recently committed to
further infrastructure spending to upgrade
nearly all aspects of the
national infrastructure, increasing its three-year investment budget. Housing
is a
major item of the government' s infrastructure investment plans.
Rents and house prices are likely to remain relatively weak for at least the
next three months. A complete
property revival is unlikely until at least
late 2010. It will depend on the local and global economies
improving, as
expected to occur in this timeframe.
We suggest that the following are the
key issues to monitor for the real estate sector in the coming year or
so:
- Improvements in the low availability of finance, overcoming highly
restrictive bank lending
practices
- An upturn in the economy,
especially in terms of improved household demand
- Improvements in
property prices and office rental prices
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