Ongoing property market uncertainty makes the right finance partner key to extracting value

Posted On Wednesday, 26 May 2021 01:10 Published by
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Results from the listed property sector in 2020 showed property values reducing by an average of around 8%. And while listed property is just one component of the South African property sector.

Claire Denny

This decline is indicative of the challenging environment being experienced by the majority of property investors.

However, according to Claire Denny, Divisional Executive: Property Partners at CIB, there is some good news for property participants, as the data on valuation reductions in 2020 shows that these were on the whole lower than some commentators had predicted they would be. “What’s also important to note is that the extent of the value decline ranges quite widely, with some sectors, properties and nodes faring better than others,” she points out.

Unfortunately, though, Denny says that the prospects for SA property remain somewhat muted for the remainder of 2021, given the lingering uncertainty around further waves of Covid-19 and the pace of the vaccine rollout. But she emphasises that this doesn’t mean there aren’t opportunities for savvy investors.

“It’s likely that commercial property values will continue to come under pressure for the rest of 2021, noting however that the extent of the value pressures will remain sector and property specific - which means that there will be opportunities for investors.”

In support of this sentiment, Denny points to evidence of new transaction activity in some areas of the market, most notably developments like community shopping centres, student accommodation, affordable housing and various industrial activities. Many real estate investment trusts (REITS) are also disposing of quality assets in order to realign their balance sheets, and these can present s opportunities for investors.

But Denny highlights the importance of not entering into property deals, regardless of how attractive they may look given the current environment, without thorough due diligence. “As always, strong property fundamentals and appropriate pricing are key components for any successful property deal in 2021 and beyond”   

She explains further that it has never been more important for investors and developers to work with finance partners who have  valuable  insight into and  deep expertise in the commercial property sector but who can also provide innovative, flexible finance structures, and leverage well-established networks to expand their opportunity base.

Our experience at Nedbank Property Partners, both before and during the pandemic, has repeatedly reinforced the value of these types of shared value partnerships,” she explains, “and because we have the expertise to comprehensively evaluate each transaction, the network to facilitate appropriate partnerships, and the financial means to invest alongside our clients or provide funding, we’ve developed a good track record of helping property investors extract superior returns.”

Last modified on Friday, 28 May 2021 01:20

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