Rode & Associates CEO Erwin Rode said weak growth in employment‚ the cooling in the growth of disposable incomes‚ still-high levels of household debt‚ tighter credit standards and contractions in the number of mortgage loans granted would continue to put strain on price inflation in the sector.

Flat rentals nationally also remained rather flat. “This is no surprise‚ in light of the persistent financial pressure that many households are under‚” said Rode.

In the second quarter of 2013‚ nominal market rentals on flats and houses grew by 5% and 4% respectively‚ whereas market rentals on townhouses posted growth of only 3%‚ the report showed.

With consumer inflation (excluding housing) of about 6%‚ this implied that in real terms residential rentals were still contracting.

Regionally‚ flat rentals in Cape Town (+5%) showed the strongest growth. Durban followed‚ with rental growth of 2%‚ while in Johannesburg and Pretoria rentals were marginally higher‚ rising by 1%.

Another important finding was the mediocre growth in the rentals of office space.

In the second quarter of 2013‚ office rentals in Johannesburg and Cape Town decentralised were‚ on average‚ grew by 6%‚ while in Pretoria decentralised rentals were up by 5%. Durban decentralised was able to muster growth of only 4%.

“There is still no marked improvement in overall office vacancy rates‚ which should be expected‚ given the lacklustre demand for office space in the wake of weak growth in the services sector‚ not to mention the lack of business confidence. Naturally‚ the outcome of this has been mediocre growth in market rentals‚” he said.

He also noted that until there were sustained improvements in the manufacturing and retail sectors‚ no magic should be expected from the industrial property market.

During the quarter under review‚ rentals in the industrial agglomerations of Durban and Port Elizabeth showed the strongest growth (9%). On the central Witwatersrand and East Rand‚ industrial rentals were up by 5% and 0.4% respectively‚ while in the Cape Peninsula rentals contracted (-1%).

Over the same period‚ building costs were expected to have shown growth of about 11%‚ implying that in all of the areas rentals actually contracted in real terms‚ the report said.