South African property market demand and supply balances are expected to improve in the second half of this year in line with expectations of lowering interest rates and falling inflation rates, key factors that are expected to provide impetus to investors.
John Loos, a property strategist for FNB commercial property finance, said yesterday that there were high expectations that South Africa’s economic performance would start to improve in the second half of 2024.
Other analysts and economists said elections slated for May 29 were casting uncertainty on South African markets and the economy.
“We do expect an improvement in investor market demand-supply balances in the second half of 2024,” Loos said as FNB released its Commercial Property Finance Insights for the 2024 first-quarter period.
“The reason for this expectation lies in interest rates having moved sideways since May 2023, and with our expectation that the next move in rates will be down later in 2024.”
Moreover, lower global inflation, expectation that global interest rates will start to decline, and lower levels of load shedding in the early stages of 2024 were all contributing to expectations of a “slightly improved domestic economic performance in 2024” for South Africa.
“All of this could conceivably cause some strengthening in property investor demand, and lessen oversupplies. The comparative market balances of the three main commercial markets appear to be largely reflected in new building planning activity, according to Stats SA building stats,” explained Loos.
Analysis by FNB’s commercial property finance division showed that the solid performing industrial property market “has seen its recent building planning levels the least down on pre-Covid-19 highs, followed by retail, while the heavily oversupplied office market is seeing the weakest planning levels” relative to earlier years.
“The industrial property market is still perceived to be the strongest of the three major commercial property sectors, and office property the weakest. All three major commercial property markets are perceived to be oversupplied,” said FNB in its insights on the property sector in South Africa for the first quarter.
It noted the industrial market being perceived as having the smallest oversupply relative to demand, while the City of Cape Town was showing the strongest all-round regional demand-supply balance.
Nonetheless, a perceived oversupply of property on the market relative to demand is currently existent across all property markets, with the industrial market perceived as having the smallest oversupply.
“Greater Johannesburg region remains the weakest region, with supply exceeding demand by a significant margin. In the area of retail property, market strength differs significantly by metro region, with demand perceived to exceed supply in Cape Town and eThekwini, while at the other end of the metro spectrum the Gauteng regions of Johannesburg and Tshwane have the most significant oversupplies,” said Loos.
FNB’s first-quarter 2024 Commercial Property Broker Survey surveyed a sample of commercial property brokers in and around the six major metros of South Africa such as City of Joburg and Ekurhuleni, Tshwane, eThekwini, City of Cape Town and Nelson Mandela Bay.
The office space survey by FNB pointed to Johannesburg and Tshwane as having the weakest demand versus supply balance. The Nelson Mandela Bay region was the weakest of the coastal metro regions, recording -71.5, followed by eThekwini’s -56, while Cape Town by comparison was perceived to be not far from balanced, with only a slightly negative reading of -10.
“With regard to the average perceived time on the market, the first-quarter survey points to an aggregated perception of virtually unchanged average time of properties on the market prior to sale in both the office and retail markets, with only the industrial market perceived to have shown some strengthening.”
BUSINESS REPORT