Nedbank Corporate Property Finance, the largest commercial and industrial property financier in the Western Cape, had by the end of 2005 approved over R5 billion worth of new property loans.“This,” said Timothy Irvine, Head of Nedbank Corporate Property Finance, Cape, “is significantly up on the R3,1 billion approved last year and indicates clearly what a phenomenal year we experienced.”

While the increase could partly be ascribed to some large transactions, one of which was Nedbank’s funding of a number of projects at Century City, even without these large transactions, said Irvine, there had still been a 30% increase over last year.

“In our view,” he added, “the increase in our lending activity was at least partially due to our strong client relationships and their confidence in us as financiers; but it was also strongly supported by the stable economic environment.  The volatility of the 1990s and early 2000s has not been evident for some time and the recent stable interest rate environment has generated a healthy property industry.”

Nedbank, said Irvine, expects the relative interest rate stability to continue for the next two to three years.

“Looking at prospects for 2006,” Irvine continued, “the market consensus has recently been that the interest rates will rise by 50 points in the first half of this year – but many to whom we talk in the property industry believe that we will, in fact, see an interest rate decrease before the end of 2006. The economy is likely to be boosted by the government’s R320 billion infrastructural programme, as it continues to pursue a 6% growth rate for the economy and the property industry will benefit from this.” 

In planning for 2006, said Irvine, he and his team had had a good look at their business and while they believe they remain the undoubted leaders in property development finance in the Western Cape (“achieved by having a team of qualified and experienced people”) they will now be looking to grow their conventional loans, i.e. those loans to investors or owner occupiers for completed buildings and usually amortised over 10 years.

“We have the necessary skills and people to focus on the different areas of the property finance market and we will be doing just that,” said Irvine.

Although the deal volume in 2005 for Nedbank Corporate Property Finance, Cape, was significantly up on the previous year, Irvine believes that it is sustainable in 2006, but “as we are responsive to the market, there are likely to be some changes in the nature and makeup of Nedbank’s loans this year”.

“We are beginning,” said Irvine, “to see fewer large and high-end development loans (by 'high end' we mean those with end units costing over R1,5 million), but there is still significant activity in the lower-priced residential units and we do not expect that part of the market to slow down. A decline in office vacancies augurs well for commercial projects in 2006 and our development expertise makes us well placed to support this trend.  Vacant industrial land in the Cape has also increased significantly (by over 100%) in value during 2005 and this will put pressure on rental levels in this sector.

“The relative scarcity of available developable land, the continuing rise in building costs and the much-reported shortage of building skills are likely to be the only factors hampering activity.”

“Nedbank Corporate Property Finance is confident that 2006 will be another good year for property in the Cape and our property division is well positioned to remain the dominant financier in this market,” said Irvine, “but we will continue to look at what we do and, in the face of increased regulation and information requirements, we will strive to make our processes more efficient and user-friendly. 

“Our strength lies in our having good, highly experienced people and a strong base of loyal clients whom we definitely do not take for granted and on whom we know we can rely for an ongoing stream of worthwhile projects.”