Durban - Spiralling electricity prices are likely to influence residential and business property buying and letting decisions in 2019, according to a report released by FNB's commercial property finance division.
FNB property sector strategist John Loos said in the Property Insights Report that while interest rates remained important for property owners, electricity supply and costs would be a key focus area, considering Eskom’s proposed double-digit annual tariff hikes over the next three years.
He said the hikes would significantly increase property operating costs.
“On the residential property side, sharply rising electricity costs will provide a strong incentive for households to lower electricity consumption or to cut operating costs and one way of doing it is to purchase a smaller home with fewer ‘frills’, such as swimming pools”, which can add to operating costs,” Loos said.
Commercial property operating costs, especially retail property, had also been impacted by rising electricity prices.
“For all commercial property, Investment Property Databank data shows electricity costs in terms of rand per square metre per month rising by a massive 611.4% from the year 2000 to the first half of 2018,” Loos said.
While the electricity cost portion of operating costs was highest for industrial and warehouse property (35.4%), retail property operating costs were far higher than for industrial and warehouse property. “The cost per square metre per month in retail property averages R29.30, compared to R15.30 for office space and R6.60 for industrial and warehouse space,” he said. “Electricity has thus become a big deal.”