Real Estate Investor Magazine South Africa June 2014 | Page 46

STRATEGIES

BY JONATHAN SMITH

Trends To Look Out For
Six risks facing the property industry

A

lthough the global recessionary climate has
somewhat abated within the United States
and the United Kingdom, Europe continues
to face the challenges associated with the erstwhile
recession and shall take longer to recover primarily
as a result of lower productivity and poorer
planning in past decades.

Readers may remember that I have previously
mentioned that a starting point in assessing the
present economic climate and the consequent outlook
for commercial property within South Africa is to
understand the causation link between the political
and economic outlook for any countr y and the
ultimate user-demand for (commercial) property.

The recent challenges presented by Russia in Eastern
Europe are also of globaI economic concern, although
these shall not have as acute an impact on our own
commercial property-sector.

It is noteworthy that South Africa has entered a
more risky political environment of late and that the
various global indices which rate our investment-grade
potential have tendered to lower our various ratings as
an indication of our increased risk profile.

Our recent upward movement in interest rates –
albeit of only 50 basis points – is an indication that
our own economy is under extreme pressure at the
moment. A further increase should be expected in
the middle of 2014 and, if our international trading
partners read additional risk into our political
governance following our most immediate national
and provincial elections, a further decline in our
credit-ratings can be exp X