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Optimistic outlook for listed property

Posted On Friday, 05 December 2008 02:00 Published by eProp Commercial Property News
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The listed property sector will continue to see distribution growth next year, albeit at lower levels than in the past few years.

Keillen Ndlovu






Experts expect interest rate cuts in the coming year will stimulate the economy, which should also have a positive effect on the performance of listed property.

Keillen Ndlovu, co-head of Stanlib Property Franchise, said yesterday that he was expecting the listed property sector to deliver distribution growth of about 9,6% on average next year. He expected rate cuts to start at next week’s Stanlib Property Franchise meeting.

Estienne de Klerk, a director at Growthpoint Properties, said trading conditions would remain tight into next year, assuming interest rates remained high.

Interest rates were likely to be cut early next year, which would boost the property sector.

De Klerk said high interest rates were exerting pressure on the retail property sector with smaller, independently owned stores susceptible to weak trading conditions.

Retail turnover had softened and a drop-off in demand for retail and industrial space was now beginning to be seen.

Property fundamentals were still reasonably “solid”, with vacancies remaining low but likely to rise.

De Klerk expected restricted access to debt and higher margins on the cost of debt to be challenges for the property sector next year. “Soaring utilities costs — specifically for electricity, water and rates — are also putting property owners under pressure,” he said.

There were attractive growth opportunities across the sector resulting from good quality assets coming to the market.

“Once the base interest rate drops, we would expect a six- to 12- month period for the impact to be felt in the listed property sector,” De Klerk said.

ApexHi Properties CEO Gerald Leissner said his company’s focus would be on growing its revenue base next year, and forecast revenue growth in its core portfolio would be 11%.

Vacancies across all portfolios would probably fall from 7% to 5,5%, and rental income growth would be 15%-20% on renewals.

Leissner said it was unlikely the market would experience a property boom such as the one seen over the past few years for at least another five to six years.

Brian Azizollahoff, head of the Property Loan Stock Association marketing committee and CEO of Redefine Income Fund, said there were good reasons for property specialists to remain confident that investing in listed property was a sound, long-term investment choice.

South African property fundamentals had stayed firm in the face of the global downturn with last year’s Sapoa/IPD property index showing a total return of 27,7% for commercial property for that year.

Azizollahoff said the market was facing a tightening supply of property and this should continue to drive good returns for existing portfolios.

Consolidation in the listed property sector continued to create large, diversified funds, creating liquidity in the market.

He said larger funds offered liquid exposure to the South African property market, which held appeal for both corporate and foreign investors.

Azizollahoff said listed property still had good access to funding, and low borrowings of less than 50% of loan to value.

Last modified on Friday, 18 April 2014 17:21

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