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South Africa Real Estate Report Q4 2011
Business Monitor International, Oct 2011, Pages: 63
Business Monitor International's South Africa Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Africa's Real Estate industry.
According to South Africa-based financial service group Standard Bank, house price growth in South Africa fell to 2.4% y-o-y in July 2011 from 2.9% y-o-y in the previous month, reports Fin24. However, commercial real estate activity has picked up over 2011, with an occupier-friendly marketplace, according to Jones Lang LaSalle. Johannesburg is benefiting from its new Gautrain network and, as new stations open, property prices near to them are rising.
Developers in South Africa avoided much of the stress caused by the global financial downturn while busily building ahead of the 2010 FIFA World Cup. Despite the decidedly quieter environment, Aveng reported in Reuters that its two-year order book was up by 19% in September 2011, to ZAR37bn and that itsZAR112bn project opportunity pipeline was stable.
South Africa has a well developed real estate investment trust (REIT) sector which owns a significant amount of the prime office, retail and industrial property in South Africa. Liberty Property Fund (owned by the larger Liberty Holding Company) is a significant owner and developer in the retail and hotel property sectors in South Africa.
The Top five REITS in South Africa are:
- Sycom Property Fund
- Emira Property Fund
- Liberty Property Fund
- Capital Property Fund
- Fountainhead Property Trust.
These property funds hold a mix of office, retail and industrial office space in South Africa. Their combined market capitalisation by September 2010 was EUR9,784mn.
Some of the key opportunities in the real estate market include:
- BMI expects GDP growth of 3.5% in 2011 and 4.0% in 2012. The recovery will continue to be driven by the consumer, and supported by government spending, while strong import demand should act as a dampening force.
- The government is under pressure to improve the process of bidding for public-private partnerships (PPPs) as developers had complained it cost them too much to do so. The Independent Online reported in September 2011 that Wilson Bayly Holmes-Ovcon had described the process as long and drawn-out and had pointed out that PPPs were not a viable long-term solution to the country's problems with developing sound infrastructure. A commission has been established to improve the situation, including trying to reduce corruption and build up the necessary capabilities within the government itself.
Some key risks to the current real estate market are:
- The government's attempt at stopping foreign nationals from owning land, although it looks likely that restrictions will be placed on sales, rather than an all-out ban. According to Bloomberg in August 2011, the suggested land reform policy is to stop, for example, the exporting of all produce from foreign-owned farms.
- Public sector investment has tailed off. The industry's reputation could be tarnished by problem players: The financial director of troubled South African property firm Sea Kay, Stef Greef, announced his sudden resignation in July 2011, fuelling concerns over the financial viability of the firm, according to The New Age. The National Housing Finance Corporation (NHFC) bailed Sea Kay out in 2008 with a ZAR128mn (US$18.7mn) advanced loan and agreed new payment terms at the end of 2010 when ZAR108mn (US$15mn) was still owed.
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