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Johan Hattingh
September 22, 2017

Rode & Associates says Capitalization rates are now firmly on a rising path

in Office, Retail, Industrial, Hotels and Residential
Property, whether directly held or listed, was the darling of South African investors over the past decade and longer.
Aerial image of Ballito Junction
September 22, 2017

Ballito Junction Regional Mall is crowned the best new shopping centre in South Africa

in Office, Retail, Industrial, Hotels and Residential
Ballito Junction Regional Mall has been named the best new shopping centre development in South Africa this year.
Jacques Du Toit Absa Hoam Loans
September 21, 2017

Marginal improvement in residential building activity up to July

in Construction, Energy and Infrastructure
Building activity in the South African market for new private sector-financed housing showed some marginal improvement on a year-on-year basis in both the planning and construction phases in the first seven months of 2017, based on data released by Statistics South Africa.
Christian Ulbrich
Sep 21, 2017

Jones Lang LaSalle South Africa 2017Q2 reports reveal useful trends on industrial,…

Real estate consulting firm, JLL South Africa, has released its Q2 2017 research reports of the industrial markets in…
Lesetja Kganyago SARB Governor
Sep 21, 2017

Repo rate remains unchanged at 6.75%

The repo rate will remain unchanged at 6.75% per annum, Reserve Bank Governor Lesetja Kganyago said on Thursday.
John_LoosFNB
Sep 21, 2017

John Loos comments on the unchanged Repo Rate

SARB leaves Repo Rate unchanged after only 1 x 25 basis point cut in the current cutting cycle. Weak consumer…

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Company Profile

Kei Commercial

Due to extensive experience in the property industry we are able to offer the following services: 1. Brokering Division1.1 Selling of Commercial/Retail properties on a national level1.2 Leasing of Commercial/Retail properties1.3 Lease Management 2. Portfolio…

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Christopher Lister-James

Christopher Lister-James

Christopher Lister-James is a Director and Co-Founder of Vantage Capital. He also serves as a Non-Executive Director at Spescom Limited. Lister-James is also an Independent Non-Executive Director for Fortress Income Fund. 
Monday, 29 October 2012 10:08

Why a recovering US property market bodes well for SA

Written by eProp Commercial Property News
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The United States has long held sway over the global economy and as such its welfare has had far reaching implications for the rest of the world. Cue the sub-prime mortgage crisis in 2007 which effectively crashed the US housing market, and of which the effects are still very much in evidence, particularly in America and parts of Europe.

Bruce Swain"Due to the US's incredible economic power we've often noticed that the local property market tends to lag between three to six months behind the American market", says Bruce Swain, MD of Leapfrog Property Group. As such local estate agents and buyers are inclined to keep an eye on developments in the US. "Of course South Africa is a different kettle of fish and one would be foolish to assume all movements in the US market will be mirrored in ours but, it does often give one an indication of what could be headed our way", says Swain.

Even earlier in 2012 many still doubted as to when the US real estate market would begin recovering. Now it would seem that revival is in sight; JP Morgan & Co and Wells Fargo & Co, the principal home lenders in the States report double-digit quarterly earnings growth last week. According to Sterne Agee, a banking analyst from Todd Hargeman as reported in the LA Times, both companies "clearly expressed a view of signs of recovery, if not stabilization".
The "Improving Markets Index" as compiled by the National Association of Home Builders and First American Title Insurance indicates that a 103 housing markets across the US now qualify to be listed, up from 76 in January 2012. Barry Rutenberg, chairman of the National Association of Home Builders (NAHB), believes that; ""This is an encouraging sign that the housing recovery is proceeding at a steady pace as firming prices and employment help spur new building activity, which in turn generates new jobs and more home sales."

Whilst improving markets are still a far cry from stable or even better, growing markets, it is the first sign that the American housing market is recovering. Broadly speaking any recovery in the States is bound to filter through to the rest of the world, which should eventually lead to rallying of exports from SA to Europe and other economic corrections. These corrections will hopefully lead to more job creation, increased earnings and ultimately, the amelioration of the local property market.

That being said, there are local factors that have a greater, and more immediate, effect on the SA industry such as the recent wild cat strikes and the tragedy that took place at Marikana, the staggering level of unemployment and the downgrading of our sovereign debt. These circumstances shake investor confidence, decreases international funding, threaten our exports and ultimately culminate in an impoverished economy.

Factors that contribute more directly to the property market include the lack of household savings, the high level of household debt-to-disposable income ratio, the increase of municipal rates and the difficulty of obtaining a home loan.

Bruce Swain believes that the South African Reserve Bank has done what it can to aid the property market by keeping the repo rate at a low 5%. According to John Loos, Household Sector and Property Strategist at FNB, the greatest problem the market now faces is the lack of household savings. At present the household debt-to-disposable income ratio stands at 76.3% (an increase over the first two quarters of 2012). Loos states that: "This savings shortage is a serious structural issue not only constraining the housing market but also many people's ability to retire financially sound."

Combined with the fact that banks' lending criteria are now considerably more stringent than four or five years ago the reality is that many potential buyers cannot amass the deposit needed to secure a loan.

Of course saving isn't the only problem. Municipal rates and tariffs have increased: Loos points out that where the average house price/average remuneration ratio fell by -24.4% since 2008, the rates and tariffs/remuneration has increased by 6.54%. Savings are less and properties are costing more to maintain – hardly a recipe for a sound property market.

That being said, the local property market is still stable, if sluggish, and there are slight indications that it's picking up. Yes, South Africans need to start saving there's no doubt but, our market didn't take the hit many of its international siblings did and with the stable repo rate and banks easing their lending criteria somewhat there is hope. Sellers are still placing their homes in the market and the buyers are there. "Remember, regardless of the current global and national economic situation, property is a long term game and the industry will correct itself in time. Patience is key during this period", advises Swain.

Last modified on Wednesday, 14 May 2014 19:32

Listed Property, REIT, Real Estate Funds

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September 21, 2017 Listed Property, REIT, Real Estate Funds eProperty News
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Office, Retail, Industrial, Hotels and Residential

Johan Hattingh

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September 19, 2017 Green Building and Sustainability eProperty News
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Commercial Property Auctions

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Africa, International Property News

Graeme Katz IAPF CEO

Investec Australia Property Fund acquires Melbourne industrial property

September 18, 2017 Africa, International Property News eProperty News
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Construction, Energy and infrastructure

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