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Vivian Warby
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Vivian Warby vivian.warby@inl.co.za FIND US US HERE: HERE: FIND
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THE RESIDENTIAL market is already showing some improvement this year. PICTURE: ATRIX/PIXABAY
Letter from the editor Letter from the editor
IF WE needed more evidence that the poor suffer the most in economic downtimes, we had only to look at recent Lightstone figures. almost every market AT While A RECENT meeting I found segment showed a positive upward it interesting that, when people trajectory (not by much, mind were talking about what wealth you), the market for homes under R250 000 shrunk drastically in meant tohas them, every single one the past few years.with owning equated wealth There are two schools of property. thought here. One is that things risingforcosts on many have With improved that sector, fronts, however, for some so people can hang on to theirit had homes, on to them and rent to be abuild choice between owning out the new section. The aother is a property or building business property prices in that bracket have or educating their children. improved, knocking them out and is not over Owning the R250property 000 range. And then always possible, there is thought thatand the yet, poorto do truly havegeta poorer. roof over your head you analysis the canWhatever call yourthe own is stillondesired. Lightstone figures is, overall, the Due to our past, our country picture for the property market has seen manyfor people live to a is glum – except the market ripe old agehomes, never between having owned for mid-level R250 000deeds and R700 000, homes. which has the title to their recovered just above 2016 levels. And oftentotheir children and In one of its latest reports, grandchildren today are working Lightstone, which provides data hard to ensure they create and analytics on property, says the generational wealth with back bricks residential market bounced last after a tough 2020, when andyear mortar. the market completely On thewas other hand, shut down for months. interestingly, we have the However, the low-value market world’s richest selling off (under R250 000)man has declined his property assets.years. It has been significantly in recent Last year, 53 384 transfers reported that Elon Muskwere has registered, comparedleft to ainsix-year only one property his high of 82 985 in 2016. portfolio, which has gone on While there was recovery in and off the market a few times in other markets, the performance recentallmonths. across five bands is “poor to pedestrian, just the And, ofwith course, wehigh-level have a band performing positively”. growing issue of homelessness Hayley Ivins-Downes, head of involving people who may until have digital at Lightstone, believes had a home once, and who the macro environment improves, itdon’t is unlikely property now,the and othersmarket who have will recover although “there never hadeither, a home – whether have been pockets of resilience and rented, shared or otherwise. growth in certain geographical areas A recent late bloomer in and price bands”. theShe house market saysownership high-level transactions (R700 000I had to R1.5 million)I would were at myself, thought abe six-year high renter. last year, as were a forever That is until luxury transactions, and the superinterest rates started coming luxury market was not much short andhigh. monthly payments ofdown its 2016 The data, she on a home loan middle were no higher says, confirms class and than wealthier better the rent.homeowners With some are banks giving weathering the economic storm. 110% loans, it meant you could Talking to estate agencies, many also cover your transfer costs. in Cape Town and along the Atlantic So, I –took the leap. Seaboard areas that are The seeing a fact that I owe theand bank a lot of surge of semigrants overseas buyers – had March.toRentals money, thataI good now have worry are also rates seeingand a gentle rise. about taxes, property However, with rising fuel and values and upkeep of the home, food costs, not to mention rising pales in comparison to the interest rates, whether the overall feeling will of owning markets improveproperty. or go back to their However, downward Islide of theif past five wonder property years will be something to watch. ownership is always going to We hope the government and be seen as the cornerstone of local metros do all they can to wealththecreation? What dosoyou create right environment all think? can have, and keep, a roof citizens over Warm their heads, including looking regards at helping the micro developers providing rentals in the townships, and enabling developers of low-cost vivian.warby@inl.co.za and affordable housing. Let’s see.
A P R I L
OFFICE property owners must optimise costs and income as much as possible by looking for innovative ways to generate revenue. PICTURE: JIESUANG NG/UNSPLASH
Green shoots sector is inOffice the residential rental market still in doldrums
Landlords encouraged to beare innovative if their going to pay Flats and town houses likely to be mostinvestments in demand, are say experts BYBONNY BONNYFOURIE FOURIEbronwyn.fourie@inl.co.za bronwyn.fourie@inl.co.za BY
O T
of office HEWNERS RESIDENTIAL rental properties will have to market is starting to bounce getafter creative if theythree want back a difficult to dig themselves out of years – not a high bounce, their Covid-pandemic hole enough but some upward movement, to make their property investments nonetheless. work forCredit them.Bureau’s Residential TPN Right now, for saysthe John chief Vacancy Survey firstJack, quarter executive Galetti Corporate of this year of shows a “sharp decline” Real Estate, the office market in vacancies, which points to remains the “poor cousin” improved confidence and theof the commercial property industry as market starting to normalise. retail returns to news pre-Covid levels “This is good for landlords and have the industrial property sector who been battling consecutive has remained resilient throughout. quarters of de-escalation,” according “You can see evidence of this to the report. in your movements TPN’sday-to-day Market Strength Index – are in back in theterritory shops and ispeople also back positive at restaurants – butanyou maythreehave 52.9 points after almost noted thatin although is more year period negativethere territory. traffic, there isexplains: not as much as The report “The index was pre-Covid. isthere a measure of market supply “People are still hybrid working and demand of residential rental and thatMarket means equilibrium a significantis property. numberatof50offices vacant,” reached points,remain at which point Jack says. demand and supply are on an equal Although commercial property footing, indicating the potential for owners vacancy are usually affected reduced ratesless and rental by small interest rate hikes because escalations.” of lower gearingFNB ratescommercial – a financial In December, ratio that comparesJohn some form of property economist Loos owner equity (or capital) to funds predicted the interest rate increases borrowed by the company – they would probably spark a turnaround arethe affected GDPbut, growth or for rental by market although decline because this “directly the recovery would not be impacts vacancy and rental great, it would definitely be anlevels”. “It’s the underlying tenants improvement. who more affected in their Heare said the rate decreases ownthe businesses thatofultimately over past couple years had determine where the pressure seen financially strong tenants will release.” buying their own homes while the Generally, Jack says, commercial remaining tenant population was propertyfinancially owners are under of the hard-hit because increasing through rising effects of thepressure pandemic lockdowns. rates and operating costs asrates, thesethe But, with rising interest “continue surge waytohigher opposite wastopredicted happen. than underlying escalations”. This “Those aspirant first-time buyers effectively means larger market portiona may just wait in thea rental bit longer.”
of the is being attributed Loostotal alsorent expected to see some toward costsininstead of the base acceleration rental inflation, rent, “which what the although it tooiswould not landlord be large. ultimately wants”. At the time, he said: “If rental He advises owners inflation reachesproperty 4% or 5% next to optimise costs andisincome, year (2022), which more or looking less forline non-gross lettable area revenue in with general inflation, then I where would possible. say it will probably do well. I do “Cellphone not expect tomasts see a and pipingadvertising boards good hot rental market butare a significant examples of this. improvement from where it has tech where possible been“Deploy recently.” to reduce the people onthe siteTPN’s The upward trend in managing a building.” Demand Strength Index is likely Because lockdown forced to assist landlords to recover from companies to accept a remote below-inflation escalations that workforce was not only viable, have negatively impacted returns but in could years, also deliver recent it says.improved cost and“However, productivity efficiencies, while the lower says Malusi Mthuli, provincial national vacancyKZN rate has recovered headthe at FNB Commercial Property from double-digit vacancy rates Finance, the–conversion of first seen in 2021 13.31% in the commercial spaces into residential quarter of 2021 compared to 8.26% units, although a new– trend, in the first quarternot of 2022 it has is also for to office property owners yet toone return the pre-pandemic to consider. level of 7.47% achieved in the first Oneofof the driving forces quarter 2020.” behind trend, heperspective, says, is the Fromthis a provincial factvacancy property funds continue to the rate is “mixed” with offload large portions their of the continued growth inofsupply officehousing stock, “which now rental in somemost provinces considera less viable from a returns limiting return to pre-pandemic perspective than properties in most vacancy levels. other sectors”. The report states: “Fortunately, this offloading • In Gauteng, a surplus of additional of office spacestock is somewhat rental housing is slowing the serendipitous given the significant province’s vacancy rate recovery. upswing in According to demand Stats SA, for the wellformal located residential properties rental housing market increased in that align with thetochanging Gauteng from 40% 48% in 2020. lifestyles of an evolving The province is home working to nearly population.” half of all South Africa’s tenants. Mthuli says prices of isempty Its slower rate of recovery being office blocks lower rate thanof exacerbated byare a higher ever, buildings and the costs office beinginvolved converted in converting themaccommodation are “far into rental housing than building them from aslower” commercial real estate remains scratch, especially from a utilities under pressure. “On the up side, however,
infrastructure viewpoint. that have negative rental escalations local governments arethe been“And a trend in the province for actively seeking opportunities past five consecutive quarters areto partner with developers back in positive territory.” to leverage residential •inner-city In the Western Cape, projects tenant as a way of addressing growing demand continues its positivesocial housing backlogs.” trajectory and is reverting to the However, pointslevels out last historically lowhe vacancy investing in and conversion seen in 2016 2017. projects is notThe an percentage automatic of ticket to riches. rental “As with any to property properties relative the percentage development, in any sector, of total households is stable, caution isan required.” indicating increase in ownerProperty entrepreneur and occupied properties. chief executive of Frankie “Rental escalations have Bells been Real Estate Grant Smee believes under pressure in the Western whilesince many landlords wantoftoonly Cape 2019. It was one meet residential there are two provinces thatdemand, experienced factors that should bethan considered de-escalation for more four before proceeding. consecutive quarters, from the might a third“While quarterone of 2020 to have the second structure or physical building, quarter of 2021. Encouragingly, it’s still important weigh rental escalations aretoback in up whetherterritory the property lends itself positive in 2022.” conversion.” bucks the declining •to KwaZulu-Natal He suggests that the following vacancy rate trend with a sharp factors are considered prior to increase in vacancies in the first investing: quarter of this year to 13.26% from Location: Most the properties 9.34% in the last of quarter of last year. converted fromthe office to of residential This is probably result the are in areas where is demand continued impact ofthere the July civil for residential easy unrest and riots and which ledaccess to higher to amenities. and the closure of unemployment It needs to feel like home: some businesses. “While home “Priormany to thepotential pandemic, KZN had will be attracted to theto abuyers lower vacancy rate compared prospect of average.” living in a business the national district, the property still Loos predicted thatwould flats and, have to feel like home. to a lesser extent, town houses, “Itbe needs comfortable, would mosttoinbedemand by quiet, spacious tenants this year.and inviting, with easy to shops, restaurants “I access don’t think freestanding and walking houses will be routes. in major demand. If the is right: You need We are structure still in a financially to weigh upenvironment, the costs of so building constrained smaller renovating an rates existing isoff-plan better asvsyou save on the bill property. You also need and maintenance costs, alltoofconsider which parking, the rental property’s size and are built into value.” He said properties in the middle
what’s available in 000 the to area in000 the price segment of R7 R12 price bracket. asame month – and possibly a little above notes that sought while many that Smee – would be most after. landlords still want to reinvent Although some landlords might vacant properties, are be getting desperate,there says Grant hoteliers who entrepreneur are also looking Smee, property and to get in on director the action. managing of Only Realty, “Such partnerships are placing a tenant in your vacant designedmight to fulfil needs all property helpthe curb youroflosses parties involved. in the short term, “but putting the “The tourism sector still not wrong tenant in can have isa lasting up to speed and accommodation negative effect”. forIn travel remains seasonal.”all the addition to performing The current pressure necessary checks to ensure on youoffice find owners is also tenant, being he aproperty reliable and respectable revealed in the number of new says, landlords should: building plans being In passed for Always communicate: suchwhere properties. cases the tenant already Johnthe Loos, property sector occupies property, be sure to strategist at FNB communicate and Commercial put everything in Property Finance, says while writing. Remain calm and rational non-residential statistics should somethingbuilding go wrong and showed “positive growth” forand seek advice from estate agents January, in square metres of lawyers where necessary. building plans by passed, officeDon’t Don’t be fooled fast cash: space and completions fall intoplanning the trap of accepting a weresum the of “key drag” on overall large cash upfront in lieu of non-residential building levels, regular rental payments. remaining low they compared to Just because have the pre-lockdown levels. money now, doesn’t mean they’ll plans passed declined have“Office it in four months’ time when by next 17.9% year-on-year the payment is due.in January 2022 off a where very low Don’t rush: In cases the base a year prior.” tenants are dragging their feet about He the sayslease, the low level signing don’t loseofhope. planned new office space Try your best to clearly developments,perform despiteall some communicate, the recent growth, not surprising, necessary checks,isanswer any with office vacancies nationally questions they may have and at record spend a fewlevels. days mulling over the your“Employment decision beforenumbers jumping in into economic sectors aoffice-bound lease agreement. haveyour declined since like lockdowns Trust gut: Much any started in 2020, greater levels relationship, if something feels of remote the future, off whenwork you’reare engaging withand efficient use oftrust office space amore prospective tenant, your through the ‘hoteling’ of desk instincts. space is a keycan factor too.” but Paperwork be forged your intuition is rarely wrong.
DISCLAIMER:The Thepublisher publisherand andeditor editorofofthis thismagazine magazinegive givenonowarranties, warranties,guarantees guaranteesororassurances assurancesand andmake makenonorepresentations representationsregarding regardingany anygoods goods DISCLAIMER: servicesadvertised advertisedwithin withinthis thisedition. edition.Copyright CopyrightANA ANAPublishing. Publishing.AllAllrights rightsreserved. reserved.No Noportion portionofofthis thispublication publicationmay maybebereproduced reproducedininany anyform form ororservices withoutprior priorwritten writtenconsent consentfrom fromANA ANAPublishing. Publishing.The Thepublishers publishersare arenot notresponsible responsiblefor forany anyunsolicited unsolicitedmaterial. material. without PublisherVasantha VasanthaAngamuthu Angamuthuvasantha@africannewsagency.com vasantha@africannewsagency.comExecutive ExecutiveEditor EditorProperty Propertyand andEnvironment EnvironmentVivian VivianWarby Warbyvivian.warby@inl.co.za vivian.warby@inl.co.za Publisher FeaturesWriter WriterBonny BonnyFourie Fouriebronwyn.fourie@inl.co.za bronwyn.fourie@inl.co.zaDesign DesignKim KimStone Stonekim.stone@inl.co.za kim.stone@inl.co.za Features
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