Listed property loan stock companies make a comeback

Posted On Thursday, 20 November 2008 02:00 Published by eProp Commercial Property News
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Since June 2008 listed property loan stock companies have staged a comeback, says Gerhard van Zyl, Chief Executive of Vukile Property Fund which is a member of the Property Loan Stock Association of South Africa

Gerhard van Zyl Chief Executive of Vukile Property Fund










The Property Loan Stock Association (PLSA) is the representative umbrella body of the property loan stock sector of the JSE Limited comprised of voluntary members, with the weight of nearly all of the funds within the sector behind it. The PLSA both represents the sector and provides a resource for its member companies and is chaired by Norbert Sasse, CEO of Growthpoint Properties Limited, the largest South African listed property company.
Unfortunately, most of these gains have been offset by the turmoil in the international and South African markets brought about by the worldwide liquidity crisis. “Although investor confidence is low and we find ourselves in a generally unfavourable economic environment, it is comforting to note that the short to medium term fundamentals of the property sector are still fairly sound,” notes van Zyl.

The most important of these fundamentals is the ability to continue to grow rental income given the current shortage of property stock.  Properties across the board are still experiencing record low vacancies and will continue to do so in the foreseeable future, which bodes well for the continued positive performance of the listed property sector.

This is in a large part due to a number of barriers that are preventing new properties from being developed including high building costs, a shortage of electricity and the high cost of borrowing.

“Building costs have peaked and we are no longer expecting to see building costs grow at 20% to 30% per annum. This will naturally place a cap on where asking rentals on new stock can go,” points out Sasse.

Huge increases in energy costs and rates and taxes are, however, expected have a negative effect on the net incomes of property companies.
“Generally speaking, retail is the one sector that is coming under more and more pressure and is likely to see lower income growth, given the high interest and inflation rate and the effect these have on the consumer,” says van Zyl.

Consensus is that shopping centres which are dominant in the areas they serve are less exposed to the generally negative trading environment, and are not yet experiencing a dramatic slowdown in trading.

Last modified on Friday, 18 April 2014 18:34

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