Property sector starting to show encouraging signs of improvement


Bheki Vilakazi named new MD of SVA International

Bheki Vilakazi named new MD of SVA International


According to Bheki Vilakazi, managing director of SVA International, South Africa’s property market is starting to show encouraging signs of improvement. This after having been sluggish over the past five years.

Currently classified under financial and business services, according to the 2021 Property Sector Charter Council (PSCC) report, the financial, real estate and business services sectors accounted for 22% of the country’s real value added, generated by producing goods and services.

“In South Africa, according to a PSCC study, the SA property market contributes R5.8tn, thus significantly contributing to GDP. A 2018 South African Reserve bank (SARB) report also estimated that SA’s total fixed capital stock is worth R7.6tn. This means that property accounts for 76% of SA capital stock outside of machinery and transport,” says Vilakazi.

While these are positive figures, the property market has suffered significant losses. There are, however, likely to be improvements in 2022, from commercial to residential property, with industrial showing the most promise.

Navigating the challenges and celebrating the wins

The economy is expected to improve from 2022 onwards, compared to where it was in 2020. The actual average capital values on commercial property will at least halt their decline of recent years, moving back into very low single-digit positive figures in 2022.

The hotel industry took a big hit in 2020 and 2021. Travel bans due to lockdown restrictions reduced the number of local travellers as well as visitors to the country, which dealt a hefty blow to the leisure and hospitality property sector. This, however, is expected to improve in 2022, with increased hotel occupancy levels.

In terms of office space, while occupancy dropped during lockdown and has continued to be low, many workers are expected to return to their offices this year; however, numbers are unlikely to return to those seen before lockdown.

In the retail sector, a significant increase in online shopping has led to reduced footfall in shopping centres and reduced need for retail space. Retail property made something of a comeback in 2021, however, and its total returns last year likely outperformed those of office property but underperformed those of industrial property. In a financially constrained consumer environment, however, retail centres could focus more on high-frequency essentials, and less on luxuries and low-frequency purchases.

The industrial property market remains the relative outperformer of the major commercial property classes and is expected to continue its positive performance. This is amplified by an increased demand for warehousing space due to the online shopping surge.


Recent Posts