Commercial property still a good bet
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Despite difficult times in the property market in South Africa, fundamentals of commercial and industrial property remain strong.
"From an equity point of view, we are currently in an exciting space in the property market. Current market conditions provide property investors with good value for quality properties and auspicious investment opportunities in this sector," said Rob Wesselo, head of equity investments at Absa Commercial Property Finance on Wednesday.
He said the rental market was particularly buoyant in industrial and commercial markets, showing strong rental growth and high tenant demand.
According to Wesselo, rising development costs, shortage of serviced land has slowed the supply of new developments, leading to spike in rental income.
"In the last 12 months construction costs of building office blocks have increased by approximately 30% and developers are also faced with increased financing costs due to sustained interest rate rises," he said.
In addition, ten consecutive interest rate increases since June 2006 have caused commercial property prices to soften, resulting in repricing of assets.
"High interest rates and low property yields have forced many buyers out of the market in recent months resulting in a shortage of property investors. These factors, in turn, have provided equity opportunities for equity investors," .
Authored By: Wesselo