Rode’s latest survey results confirm – if confirmation was necessary – that the SA property market is under serious pressure. The economy has now been in recession since the third quarter of 2019, and the impact of Covid-19 will accelerate the slide. The emergency budget delivered in June points to a worsening fiscal crisis, which could drag South Africa (or the bakkie on the front page) over the cliff if drastic measures are not implemented. The severe economic slowdown has implications for the valuation of property and we deal with this in our special article at the beginning of report. The second-quarter surveys were conducted in May 2020 when transaction volumes were very limited due the lockdown, which forced estate agencies to temporarily close or work from home, preventing the physical inspection of properties. One would imagine that convincing a buyer to purchase or a tenant to rent a property without physically seeing it would be difficult, even if you had the best technology at your disposal. In fact, out of Rode’s total survey respondents, 56% said the firstquarter data were still applicable due to lack of new transactions. Almost all other respondents provided data indicative of a weaker market. We expect the real impact of the coronavirus crisis will only be seen in coming quarters as transaction volumes increase. Leases that come up for renewal will see sharp rental reversions as most landlords aim to keep tenants as the risk of finding good new tenants in this market is high. A vital point to remember is that the property market was already oversupplied before Covid-19 emerged in South Africa in March. This implies that the pandemic will prolong the oversupply situation, with a sustained upturn now several years away.
The industrial market, like other property sectors, is also feeling the impact of the very weak economy, which has been dragged down further by Covid-19 since March 2020. Nominal industrial market rental growth slowed to 1% year on year in the second quarter from 2% in the first quarter, with vacancies remaining higher than in 2019. Rentals were virtually unchanged compared to first-quarter levels. We believe this is reflective of the very thin market, with few transactions taking place during the lockdown.
Reference : RODE
