SPECIALISED banking services company Cape of Good Hope Bank is bucking the trend, expecting improved property development activity this year.
The bank, a subsidiary of Nedcor, bases its assumption on its latest lending figures, which suggest that, despite oversupply in the property market, development activity is at a record high and will remain buoyant regardless of the recent percentage point increase in interest rates.
Given the oversupply in the office and retail sector, development is expected to slow down as the market searches for equilibrium.
Bank lending head Peter Smith says that, at the current relatively low interest rate levels, the capital growth on investment in property will rival that of most equities in the next few years.
'This message seems to have been accepted by most of the investing public, which has pushed requests for development finance to record highs,' says Smith.
In the fourth quarter of last year, Cape of Good Hope Bank approved property loans worth more than R640m in Western Cape and Gauteng.
The bank has been operating in Gauteng for two years, focusing on Pretoria, Midrand and Johannesburg. 'Gauteng contributed 25% of the deal flow, which is very pleasing considering we are only financing long-term commercial developments,' says Smith.
He expects the bank's lending to remain at equally high levels throughout the first quarter of this year, boosting its R5bn property book.
Smith says the bank has bucked the dominant trend by finding worthwhile property financing opportunities in a market that many commentators say is over supplied.
He says the bank is benefiting from its close connection with property loan stocks and finance companies. It funds expansion for property loan stocks and has taken equity in them.
It has opened niched property branches in Johannesburg and Bellville.
Smith says: 'There are still niche markets, such as convenience shopping centres.'
Publisher: Business Day
Source: Business Day