Rental growth slowing

Moderate rental growth because of a slowdown in demand for office space caused by the global economic crisis is a cause for concern, said the Rode's Report on the South African Property Market for 2009.

Moderate rental growth because of a slowdown in demand for office space caused by the global economic crisis is a cause for concern, said the Rode's Report on the South African Property Market for 2009.

But, editor John Lottering said office rentals in the decentralised nodes of Durban, Pretoria and Cape Town still showed, on average, nominal rental growth above the growth in building costs.

Decentralised rentals on the whole in Johannesburg were growing in line with building-cost inflation of above nine percent.

The report, on the state of the South African property industry in the first quarter of this year, also found that the economic threat facing this sector's stronghold, the retail trade, had put severe strain on the market.

So far only Durban's nominal rentals exceeded the expected growth in building-construction inflation while Port Elizabeth's poor performance showed nominal rentals contracting by one percentage point owing to the difficulties faced by the region's motor vehicle manufacturing industry.

On the residential property front flat rentals were unable to show any impressive growth when compared to consumer inflation.

The news for the house market remained even bleaker, with no foreseeable relief in future, the report concluded.

Although interest rates had come down and more cuts were expected during the year, this was unlikely to boost the market in the light of housing on the whole still not being affordable.

Cement sales, "the best barometer of activity in this sector", remained in the red as annual growth continued to contract.

In the fourth quarter of last year, building-cost inflation, as measured by the Bureau for Economic Research Building Cost Index, was expected to have decelerated to roughly nine percent. - I-Net Bridge

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