Rode’s report shows slow rentals and falling prices
DESPITE estate agents talking about green shoots appearing, it seems that the brakes are being firmly applied to growth in rentals, according to the latest Rode’s report.
Although some CBD nodes are recording fair growth in office rentals, the underlying trend seems to be one of deceleration, with growth in decentralised nodes at Johannesburg, Cape Town and Durban having cooled to single digits. Only Pretoria has bucked the trend, showing growth of 15 percent in decentralised market rentals.
In the second quarter of 2009, the industrial market in central Witwatersrand recorded 9 percent growth, the Cape peninsula recorded 4 percent, Port Elizabeth 0 percent and Durban -1 percent as demand slumped.
Flat rentals are clearly also trending sideways, showing dull growth when compared with consumer inflation. The best performance during the second quarter came from Durban at about 7 percent over the past year, compared with consumer prices that have grown by about 8 percent – indicating that, in real terms, flat rentals have contracted.
The report reveals that house prices have dropped by 3 percent on August last year. However, monthon-month, house prices have been up by 0.2 percent recently, translating into an annualised rate of about 2.3 percent.
But property economist Erwin Rode says that while prices remain relatively high and disposable income continues to fall, the residential property market will continue to feel pressure in real terms for years to come – particularly since income tax and electricity tariffs are likely to rise.
In the second quarter of 2009, capitalisation rates (the property equivalent of the forward earnings yield on shares) continued to move sideways on retail, industrial and office properties in the decentralised nodes of Pretoria and Durban. Only the prime office nodes, in decentralised Johannesburg and Cape Town, have strengthened. Also capitalisation rates in certain CBD office nodes have moved up.
Judged against the performance of other sectors, the building industry has remained in the doldrums in the second quarter of 2009. In the residential building sector, real gross fixed capital formation contracted by a hefty 8 percent, faring only slightly better in the non-residential building arena, where it decelerated to 7 percent, its lowest annual growth rate in almost four years.
The Haylett Index (which measures building-input costs) and the BER BCI (which measures buildinginput costs and contractors’ profit margins) are decelerating at an alarming pace, says Rode.
Call Erwin Rode or John Lottering on 021 946 2480 or visit www.rode.co.za