Advice and Opinion

Property Cycles and Booms

There is some good news for the South African property market if one takes a look at historical trends – which would suggest that the sector experiences a property boom every ten years and a constructions boom every 20 years, said Org Geldenhuys, managing director of property development and management company, Abacus  DIVISIONS.

“Although the next peak is at least another five years away there are some positive signs, including the fact that interest rates are expected to remain constant in 2013 and most of next year, enabling property owners – including in the commercial sector – to weather the storm a little bit easier.”

Geldenhuys said the South African property cycle peaked in the early 1980s and is currently feeling the back draft of the construction boom from 2001 – 2007.

“What landlords will be focusing on is the tighter management of their property portfolios with the goal of reducing vacancy levels and trying to sign tenants into reasonable long term contracts, offering a wider range of tenant benefits in the subdued market. Some landlords are taking advantage of the lower interest rate climate to invest in the market, including in the refurbishing of properties. This wise spending shines their portfolios and places them in good situation for when the next upturn does come.”

Commenting further, Geldenhuys said one of the “lingering concerns” is the continuing poor performance of the Euro Zone economy, exacerbated by less glowing prospects from China  – which is also having a knock-on effect for South Africa.  Additionally, the move by the US Federal Reserve to reduce their long-running stimulus packages – earlier than anticipated – is also leaving an air of uncertainty in financial markets.”

But, in what Geldenhuys termed “a ray of sunlight”, he pointed out that there appeared to be a resurgence and growth in the industrial property market, “which might just move us into an upturn faster than normal cycles ordain”.

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