This property class is now on average trading at a small premium
relative to non-listed property, which should lead to more listings
of directly-held property in the listed property sector, predicts
property economists Rode & Associates.
In its latest review of the property market - based on the final
quarter of 2002 - Rode Report editor Dirk de Vynck, says listed
property was about 5% overvalued relative to correctly valued,
directly-held property at the end of last year. This follows
a consistent narrowing of the value gap over the previous three
quarters, as investors' appetite for listed property as a "secure"
investment grew.
Turning to capitalisation rates (the non-listed property equivalent
of the forward earnings yield on shares), no deviation from the
weakening upward trend - which has been evident since the beginning
of 2001 - was seen in the last quarter of 2002. "The reason for this
can probably be found in the cyclical oversupply of non-residential
space, maybe exacerbated by the four one percentage point increases
in mortgage interest rates last year," states De Vynck.
He says on a national basis capitalisation rates for shopping centres
continued to weaken. Community shopping centre capitalisation rates
increased from 13,0% to 13,3%, while neighbourhood shopping centre
rates increased from 14,2% to 14,5%. "These are massive jumps for one
quarter, which seem to indicate oversupply in these types of shopping
centres."
There is a glimmer of hope  from the industrial market, which is
showing the first signs of a turnaround.
This hope of better things to come was especially evident in
industrial rentals in the Cape Peninsula and Port Elizabeth, although
signs of a turnaround were also evident in many of the Central
Witwatersrand and Durban industrial townships.
Turning to the office market, De Vynck says the last quarter of 2002
showed that the debilitating effect of the oversupply of office space
on decentralised rentals could be at its end. "But it will take some
time before investors are convinced that there has been a turnaround
in the oversupply situation, and ultimately before office
capitalisation rates start improving."
As far as CBDs are concerned, real prime office rentals in Cape Town
and Durban increased for the second quarter running. But in Joburg
and Pretoria, real CBD rentals were still lifeless in the last
quarter of 2002.
According to Rode's analysis of Sapoa's office vacancy schedule,
office demand in decentralised Pretoria, Cape Town and Durban was up
in the final of last year, while Joburg decentralised reported a
slight contraction in demand.