SAPOA outlook for 2014
"Local authorities with competitive rates, lower utility costs and incentives for property developers and owners will fair substantially better in attracting private sector investment," says CEO of SAPOA Neil Gopal.
Gopal urges local authorities to capitalise on this, as it would increase their pool of ratepayers.
"In 2014, property development activity will continue on a larger scale, such as Waterfall Business Estate and Steyn City. Public sector infrastructure spending - such as roads, rail and housing - will also have positive impact on private sector developments."
The association's recent meetings with the mayors of Johannesburg and Cape Town and senior representatives of both cities was a big step forward in the dialogue between property sector and local authorities. It hopes to continue these discussions and expand them to other regions in 2014.
Gopal adds that South Africa's low economic growth outlook of around 2%, a huge current account deficit and the possibility of a investment ratings downgrade by rating agencies, will have a negative impact on all sectors in our economy.
When it comes to commercial property, he sees retail continuing its positive performance while the office sector will remain under pressure. "Much of sub-Saharan Africa is starting to attract new multinational investment and this is also bringing more diversification to the local property market with increased interest in retail development in other African countries."
When it comes to South Africa's listed property owners, he expects more consolidation of smaller funds in 2014. This will boost the scale and liquidity of the funds. He points out the sector's fundamentals are strong and vacancies are well managed, which bodes well for solid performance. The office market will continue to be under strain.
He also points to the potential of residential REITs, will are likely to be explored by the sector this year and it isn't only in sub-Saharan Africa that this sector is identifying opportunities. It is also investing in Europe, Australian and even the US. "The new REIT structure has also paved the way for inward investment into our listed property sector."
However, he cautions the sector will remain vulnerable to the several risks in 2014. "We could see increased pressure on tenant retentions and rental growth given the low levels expected for GDP growth."
He also lists the main threats to commercial property as unsustainable levels of increasing rates and taxes, electricity costs, skills shortages in the public sector, the low economic growth rate, poorly conceived legislation, corruption and maladministration.
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