Real Estate Activities in South Africa 2023

Challenges

Any future global supply chain challenges could increase raw materials costs. Competition from imports. Declining shipping fees and the falling oil price could make it more affordable to import than previously. Higher inflation has lowered consumer’s ability to afford new furniture purchases. Increasing cost of electricity, water, raw materials, transport and labour. Loadshedding. Local logistics challenges make it expensive to transport goods and raw materials. The weak local and global economy will likely reduce sales and exports.

Introduction

The South African real estate market is fragmented and includes numerous local and global players. Property price growth has remained steady, including throughout the pandemic, although some subsectors, such as commercial properties, were significantly affected. Listed property shares fell by more than 45% in 2020, before recovering. In commercial property, rental vacancies increased, and property valuations decreased. Property owners’ operating costs are growing, and service delivery of local municipalities continues to deteriorate. Many commentators fear that the Expropriation Bill will lower investor confidence. Rental growth has been slower than the growth in house prices. Investment in commercial real estate grew for the second consecutive year in 2021 but dropped by approximately 20% in 2022. In 2021, investment in the alternative property market (co-working offices, data centres, retirement homes, self-storage, student housing and cold storage) and hospitality sector (hotels, restaurants, entertainment facilities) increased, mainly at the expense of the industrial and commercial sectors.

Opportunities

Demand for environmentally-friendly and recycled furniture is growing. High shipping costs favour flatpack furniture. Logistics challenges and higher shipping costs have made it more expensive to import, therefore favouring local manufacturing (nearshoring). Productivity SA’s business turnaround and recovery programme is available to struggling companies. The designation of furniture for procurement by state entities. The hybrid work trend is driving demand for lighter, mobile home office furniture, as well as hot desk furniture.

Outlook

Uncertainty has caused some investors to hold back, and some international investors are selling as investor sentiment worsens. The Rode Report said the real estate market will be “stuck in low gear for years to come”. Remote working will be a significant driver of the property market, likely increasing demand for properties that offer flexible working arrangements and those in areas outside major cities. More property owners and developers are looking for properties that are self-sufficient and sustainable. Residential properties are likely to continue to perform well. Commercial property may face some challenges, particularly in city centres. Warehouses and logistics centres may perform well due to the growth of ecommerce.

Report Coverage

This report focuses on the real estate industry which comprises commercial, industrial and residential properties, as well as property development, property valuation and bond origination. It includes comprehensive information on values, purchase prices and transfers and rental and vacancy trends, developments and corporate actions of JSE-listed companies, developers and estate agents. There are profiles of 123 companies including commercial property companies such as Growthpoint, Hyprop, Redefine and Vukile, developers such as Keystone, WBHO and Renprop, leisure resort and hotel developers including Southern Sun and Sun International and residential real estate companies such as Seeff, Rawson and Pam Golding as well as several valuation and bond origination companies.

Trends

A shortage of higher-skilled employees. A shortage of local and imported raw materials. Declining investment in capital equipment. Inadequate investment in skills development. Insufficient research and development. Little design improvement or new product development.