Taking a different look at risk

Posted On Wednesday, 23 May 2001 02:00 Published by eProp Commercial Property News
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The commercial and industrial property market in SA is taking an increasingly focused view of the different types of risk that pertain to investment in different property sectors and nodes, says Russell Inggs, head of Nedbank Property Finance.

Nedbank Corporate Property FinanceWhile economic conditions have generally eased for the property sector over the past two years, especially since the decline of interest rates to 14,5%, the critical importance of interest-rate volatility remains.

However, the opportunities for purchasing investment properties in city centres with high initial yields may provide a new avenue of investment for the property sector, and, notably, private investors.

The true understanding of risk in property does not lie in the macroeconomic sector but rather in the nodal and sectoral assessment of business risk.

City centres and prime decentralised nodes have performed very differently, despite operating within the same macroeconomic context.

Business risk considers changes in the property sector itself, such as a levelling off of capitalisation rates in certain nodes or high levels of speculative development activity in others.

There is a view, for example, that merchant banks are more likely to see a demand for the refinancing of existing properties than for financing new projects.

The high level of new development could place pressure on rentals.

Inggs says the implications of government's focus on specific development initiatives, such as urban regeneration, should be considered.

Last modified on Thursday, 22 May 2014 16:10

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