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With shopping centres in oversupply, an expert says do homework

Property investors who are itching to make their next purchase, but hesitating as a result of economic and political uncertainty, can still make a wise investment, depending on where and what they are looking to buy.

The specifics of each investment will, of course, signify whether they should wait for better conditions or take the plunge, says Erwin Rode of Rode & Associates.

Industrial and office properties are both currently cheap in the sense that, should the economy recover, rentals will sky rocket. Cash buys are a “sound medium-term bet”, Rode says.

Highly-geared buys, however, are “very risky” as the buyer could easily land up in a negative cash flow situation.

“Shopping centres are oversupplied in many areas so it depends on the location, price and future competition. I expect the consumer will be under horrendous pressure for a long time as our past sins catch up with us,” says Rode.

In addition to no property type being considered a 100% safe bet for investment, Rode says the days of poor investment decisions being be corrected by run-away inflation are gone, and unlikely to return as long as the Reserve Bank stays independent.

“However, the independence of the Reserve Bank is crucial in an environment where the government has lost control over its finances. So watch developments on this front with an eagle’s eye.”

Now is still a good time to invest, especially in commercial property on the KwaZulu-North Coast, says
Andre Coertze from Lew Geffen Sotheby’s
International Realty in Ballito.

Not only has the
current economic situation not significantly
affected the region but there has actually
been an increase in demand for commercial
property. 

Industrial properties could be good buys in the run-up to next month’s elections. Picture: Supplied

“Being well-positioned between two of
the busiest ports in Africa, namely Durban
and Richards Bay, and close to to King Shaka
International Airport and the Dube Trade
Port, has been the main drive for the region
as a viable location for manufacturing,
warehousing and logistics businesses.”

In highest demand are commercial
properties for distribution warehousing and
light industrial or small factories.
Coertze says there is still “an abundance”
of vacant land available for commercial
development that is competitively priced but,
as demand increases, prices will rise.

“The window of opportunity to secure good
deals won’t be open for very long,” he says.
JLL’s 2018 investment report shows
investor confidence in South Africa
improved in 2018, following the election
of Cyril Ramaphosa as president.

Activity
“recovered notably” in the year with
transaction activity reaching R19 billion.
This was an improvement from just
R11.6bn in 2017.
“Office investments dominated the
market with R10.3bn invested in more than
58 properties.

However, notable growth
was recorded in all real estate sub-sectors,”
the report says.
It adds there have already been a
number of pending transactions for
the first half of 2019 and activity in the
alternative sectors. Disposal processes are
underway in the student accommodation
and elderly care sectors. 

However, the report acknowledges that
while real estate investor confidence has
improved, 2019 may start a bit slower in
terms of activity ahead of the elections.

“Greater clarity with regard to land
reform policy may delay potential
transactions as investors await the decision
to amend the constitution on land
expropriation without compensation.” 

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