Next year should be a golden year for investors in all sectors of real estate, although there are indications that residential property activity might be stabilising, say industry experts.

Ed Grondel chief executive of First National Bank Homeloans, which has released the first edition of its property barometer, says that in the fourth quarter of last year, the barometer showed activity rated at 7.6 out of 10.

This is measured by feet through doors or the number of potential buyers visiting show houses. In the third quarter of 2004, the rating has declined by 12% to 6.7, indicating a slowing down and stabilisation of the market.

There is also an increasing portion of properties being sold for less than the asking price with a reluctance by buyers to pay high prices as income levels are increasing at slower rates than house prices.

FNB Homeloans, which interprets the views of 150 real estate agents, says, however, that the outlook for the last quarter of the year is positive as the summer months generally increase home-buying activity.

It is evident that the market was last this confident 12 months ago. Since that time, interest rates and inflation have further reduced and are now stabilising. Fifty-five percent of respondents [estate agents] expect market activity to increase over the next three months.

FNB cautions that although the household debt-to-income ratio is only 55% in South Africa compared with 80% to 120% in developed countries, property prices have increased at a higher rate than income.

Les Weil, chairman of property group JHI with a portfolio worth R8-billion under management, says that with the economy booming, retail vacancies have declined from 4% a year ago to 1.3%. In other categories of real estate, vacancies are down to between 6% and 8% from 9% to 11% this time last year.

Retail space has remained in high demand in the second half of this year, but demand for industrial premises is also on the move, with rent s rising by between 25% and 33% and space letting for between R10-million and R15-million for older property.

While demand for office space has remained fairly static, additional speculative office space is being developed. Weil believes this is good timing as he expects this sector to be the next to move upwards.

Weil notes that building costs have started to rise and advises property developers to move ahead with construction as soon as possible.

Weil expects the listed property sector to benefit from these developments.

Business Times