Changing market dynamics affect property indicators and need to be considered when assessing an application for property finance, says Chris van Rensburg, valuations head of Nedbank Property Finance.

He says potential investors need to recognise a number of risks in the prevailing commercial property market.

Firstly, the level of commercial property development in several SA cities has tended to outstrip economic growth over the past three years, so demand is not necessarily keeping pace with new supply.

'Secondly, timing is critical for a property investment. When the market is booming, the potential to sell, lease or repay a property is far greater than in a declining market.

'Thirdly, structural changes in market activity can affect returns.'

Van Rensburg says that Nedbank Property Finance has developed an approach known as security valuation, aimed at discounting the value of the tenant and assessing the underlying net value of the property.

'A security valuation approach sharpens the understanding of risk, not just of the property but of the businesses in the property.'

Business Day