FEATURE
The big trend in the Mother City is mixed-use developments, based on the perceived future demand for these types of setups. Several developments are planned for the Foreshore and Harbour areas, with completion estimated within the next decade. Gross rentals achieved in the city vary from R90-R120 / m ², with an ever-present growth in demand.
1.15 % in the 1st quarter of 2018.
Samuel Seeff, chairman of the Seeff Property group, warns that investors should pay attention to the market:“ While property barometers point to improvement ahead, they still tell the story of a flat market which largely favours buyers. Recovery is usually first felt in the primary urban Gauteng( Johannesburg / Pretoria) areas and thereafter in the coastal and other inland metros. This seems to be what we are beginning to see from the latest property market data.”
By looking at building statistics, it’ s possible to paint a picture of growth and demand in certain areas and sectors. Absa’ s Residential building statistics were published in May, and do just that. According to Jacques du Toit, property analyst for Absa Home Loans, divergent trends were evident in levels of building activity in the South African market for new housing in the first quarter of 2018.
The report looks at residential property in three categories: Houses of < 80m ², Houses of ≥80m ², and Flats and townhouses. According to the report, the number of new housing units reported as being completed was lower in each of the three categories of housing in the first three months of the year, which resulted in a combined decline of 25 % y / y, or 2 547 units, to a total of 7 652 units over this period. The segments of houses smaller than 80m ² and flats and townhouses showed a contraction of 37 % y / y and 27,4 % y / y respectively in the first quarter of the year.
The Western Cape and Gauteng were the clear leaders in new residential properties being completed, accounting for 43 % and 35.2 % of the national total, respectively. According to the report, the number of new housing units for which building plans were approved, increased by 17,1 % year-on-year( y / y), or 2 245 plans, to 15 233 plans in the period January to March this year.“ This growth was largely the result of trends in plans approved for houses smaller than 80m ², which showed growth of 33 % y / y, and plans approved for flats and townhouses, which increased by 14,7 % y / y in the first quarter of the year,” Du Toit comments.
Looking at Lightstone’ s annual inflation research, freehold properties are seeing a slowdown in value growth, while sectional title growth is increasing. Freehold has seen a 3 % growth in March of 2018, down from 3.8 % and 3.5 % in January and February respectively. Sectional title, on the other hand, has seen steady growth in value, sitting at 4.2 % in March- up from 4 % and 4.1 % in January and February. It’ s also interesting to note that, since the third quarter of 2017, sectional title properties have seen growth from 3.7 %, while freehold has declined from 4.7 %.
Commercial
While residential property remains a popular option for investors, many are itching to diversify their portfolios. The commercial sector- primarily consisting of offices and retail properties- can be a dynamic and profitable market. Let’ s look at the latest figures and stand-out performers.
In 2017, more than 300,000m ² of retail accommodation was completed( in-
cluding refurbishments and extensions). At the same time, it’ s important to note that retail trade sales for the same period was poor, reflecting a clear consumer concern for economic growth. The report explains, however, that these indicators are expected to improve throughout 2018, with factors like household credit extension showing signs of improvement and offering consumers some relief.
The report divides retail property into five categories: neighbourhood, community, small regional, regional, and super regional. There is a clear pattern in trading density growth, as at Q3 2017. Super regional centres saw a decline of 5.6 % and regional of-0.7 %. Small regional saw an increase of 0.7 %, community saw an increase of 0.1, and neighbourhood an increase of 0.9 %.
According to Spire Property Management’ s Executive Director, Sean Paul, neighbourhood retail centres that are situated within residential nodes are more resilient to market swings than others:“ They are very attractive from a convenience point of view. Consumers living in the nearby suburbs will frequent their local centre on an almost daily basis to purchase household goods and groceries, to enjoy a meal at their local restaurant or socialise over a cup of coffee, and make use of other services offered such as a laundromat or hair dresser.”
These centres also tend to be more attractive to tenants, as rent is generally much lower than those in larger centres.“ These centres often operate on a gross rental structure rather than a turnover based structure. This is appealing to entrepreneurs and small business owners who can be daunted by the high costs associated with renting retail space in a large shopping centre, and also like the certainty of fixed rentals for budgeting purposes,” Paul explains.
According to the JLL Q4 2017 Retail Market report, small regional shopping centres continue to outperform other types of retail centres. The report notes that retail vacancy rates rose across the board, with small regional centres seeing a decline in vacancies. Annualised trading density growth for these centres took a knock, but remain marginally positive.
14 JUNE / JULY 2018 SA Real Estate Investor Magazine