It is unlikely that the decision by the South African Reserve bank to lower the repo rate by 50 basis point will have a significant impact on the South African commercial property sector. Recent residential property data provided by ABSA and FNB suggest that the rise in residential values has stalled and that the sector could be experience a double dip.The commercial property sector continues to suffer from high vacancy rates, and property owners are finding it difficult to secure rental increases that surpass the inflation rate. The recently published 3.7% inflation rate will have played a role in the reserve's bank decision, yet there is growing evidence that operating costs in the commercial sector are growing at a rate well in excess of this figure. This will continue to place negative pressure on net rentals and property values. It is unlikely that the sector will , in the medium term, see a significant further lowering in interest rates. For now, prospects for the South African Property sector will largely be determined by whether investors will be sensitive to lower interest rates.
Francois Viruly
Viruly Consulting