Property market in South Africa will be a safe haven for investment in 2014, despite possible risks associated to the sector, an expert said this week.
Gerrie van Biljon, executive director at Business Partners Limited (BPL), believes that the country’s property market is less exposed to shocks in the global economy as, for example, the stock markets.
BPL oversees a property portfolio of nearly R1-billion (about US$1-million).
“Any of the imminent setbacks to the global economy, such as the raising of the close-to-0% interest rates of the developed world, or the tapering off of America’s policy of quantitative easing will reflect immediately in the JSE indices, but not necessarily in property values,” van Biljon said.
The fact that there are very few bargains to be found in South Africa’s commercial property sector – particularly manufacturing and retail space – despite the economy’s sluggish crawl back from the recession, proves the market’s status as a solid investment in difficult times, an optimistic van Biljon explained.
“Business owners that have been under pressure since the property boom, which ended in 2008, have either exited the market or now have their affairs in order.
“Investors also tend to hang onto their property investments rather than disposing of them in order to invest in low bearing return categories, and as a result few good property investment possibilities enter the market.”
The consequence of this, he added, was that capitalisation rates remain virtually unchanged, meaning the price of commercial and industrial properties did not take a major dip, unlike the residential market where prices fell.”