Rode’s re­port shows slow rentals and fall­ing prices

Weekend Argus (Saturday Edition) - - PROPERTY -

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

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