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IOL News
17 hours ago
- Business
- IOL News
South African commercial property brokers report decreased business confidence in second quarter
The upward trend in property broker confidence observed in previous quarters was reversed in the second quarter of this year. Image: Magda Ehlers/Pexels The business confidence among commercial property brokers declined in the second quarter of this year, thereby reversing the upward trend observed in previous quarters. This is according to the FNB Commercial Property Broker Survey, which assesses a sample of commercial property brokers operating in and around South Africa's six major metros: the City of Johannesburg and Ekurhuleni (Greater Johannesburg), Tshwane, eThekwini, the City of Cape Town, and Nelson Mandela Bay. Before assessing market activity levels, brokers are asked whether they find current business conditions 'satisfactory' via a simple yes/no response. In the second quarter of this year, the percentage of brokers who perceived conditions as satisfactory dropped from 55% in the previous quarter to 40%. This marks the end of three consecutive quarters of improvement, says John Loos, the senior property economist for Commercial Property Finance at FNB. The survey showed that all three major property classes recorded a decline in activity ratings this quarter, with the industrial and warehouse property one remaining the strongest-performing market, although its activity rating declined slightly from 5.69 in Q1 to 5.59 in Q2. Retail property activity fell from 4.79 in Q1 to 4.47 in Q2, while office property activity declined from 4.95 in Q1 to 4.67 in Q2. These figures were said to represent a reversal from the previous quarter, where all three sectors saw improved activity ratings. As a result, the Q2 2025 FNB Property Broker Survey suggests that both business confidence and perceived market activity have weakened, indicating a broader sentiment of caution in the commercial property space. The financial institution said the survey was conducted in May, shortly after the South African Reserve Bank (SARB) chose to hold interest rates steady in March, following three consecutive 25 basis point cuts at earlier Monetary Policy Committee (MPC) meetings. Although the SARB resumed its rate-cutting cycle in late May, it said the temporary pause may have dampened sentiment among brokers and their clients. Loos said additional factors influencing negative sentiment include the instability within the Government of National Unity (GNU) regarding national budget negotiations, raising concerns about the coalition's longevity, tense diplomatic relations between South Africa and the United States, with US President Donald Trump threatening trade tariffs and accusing South Africa of human rights violations and hostility toward the US and its allies. This led to the closure of USAID in South Africa and fears of increased tariffs on exports-potentially impacting the economy. He said that slower economic growth, with the first quarter GDP expanding only 0.1% quarter-on-quarter, down from 0.4% in the last quarter of last year, suggests that early 2025 may be constrained in terms of business growth and investment. Despite the current decline, FNB said it expected a mild recovery in property sales activity in the second half of this year. It said the full-year activity is forecast to outperform 2024 levels, driven by an anticipated 25 basis point interest rate cut in the second half of this year, supported by a low May inflation rate of 2.8% y/y-below SARB's lower target threshold of 3%. The property economist said positive signs from leading economic indicators included SARB's Business Cycle Leading Indicator (March), which rose 4.1% year-on-year and 1.1% month-on-month, new passenger vehicle sales, which surged 30.3% year-on-year in May and residential mortgage demand, which had reached 16.2% y/y growth by last quarter of last year (though data for early 2025 is still pending). Based on these indicators and a looser interest rate environment, FNB forecasts GDP growth of 1.1% for this year, compared to 0.5% last year. However, it said not all signs are optimistic as the Manufacturing PMI's new sales orders index recorded a low 38.3 in May (on a 0-100 scale), indicating continued pressure in this critical sector. Despite weaker sales activity, brokers continued to report declining vacancy rates across all three property classes. Lower vacancy rates are typically associated with stronger rental growth and improved net operating income, which may attract more investors seeking higher returns. While the second quarter of this year showed a dip in confidence and activity across the board, FNB said it remains cautiously optimistic. 'Given the expected macroeconomic tailwinds and improving indicators, a modest rebound in commercial property sales activity is anticipated in the latter half of 2025.' While the South African real estate sector has not been insulated from the various macroeconomic challenges, the sector has shown notable resilience. This was as this year got off to a volatile start with significant movements across global markets, shifting geopolitical dynamics, and ongoing volatility driven by persistent macroeconomic headwinds. Despite global pressures, South Africa's real estate market faced significant domestic headwinds. These included stubbornly high interest rates, the continuing impact of the post-Covid-19 recovery, and overall weak economic growth, said Simon Fiford, senior vice president for Real Estate Coverage at Standard Bank recently. These factors have impacted each asset class differently. Across these categories, performance has varied. 'According to Standard Bank's internal estimates, the South African commercial real estate sector is currently valued at approximately R1.9 trillion. This represents a significant increase from the R1.3 trillion recorded in 2015, highlighting the sector's growth over the past decade. "If we add to this the estimated value of the residential property market (R6.9 trillion), the market size exceeds R8.8 trillion (as of the end of 2024),' Fiford said. Independent Media Property
IOL News
23-05-2025
- Business
- IOL News
Why multifamily properties are shaping the future of South Africa's real estate market
Inkanyezi Village, Katlehong South. Image: Supplied South Africa's large-scale residential rental property market, commonly called 'multifamily', is quickly emerging as a promising segment of the country's real estate sector. Amelia Dieperink, the head of Commercial Property Finance (CPF), Affordable Housing, Absa CIB, said this was backed by competitive financial returns and reduced volatility, all while addressing a critical housing shortage. She said multifamily presents a compelling investment case. 'The multifamily offering has gained momentum, buoyed by the increasing demand for affordable, centrally located and well-managed rental housing. Institutional investors are taking note. Statistics South Africa reports that 4.5 million households, or 23% of the national population, are currently renting. "Of these, 15% (around 685,000 households) reside in blocks of apartments, pointing to a significant opportunity for scale within the multifamily sector. Multifamily housing refers to institutional ownership and professional management of apartment buildings and residential portfolios. "This model is fast becoming the global standard for urban housing delivery. According to the Centre for Affordable Housing Finance(CAHF) in Africa's recent report, Aligned Interests: The Case for Long-Term Institutional Investment in Multifamily Rental in South Africa, the sector is increasingly robust, demonstrably resilient, and qualitatively rewarding,' Dieperink said. The head said, despite challenges, ranging from service delivery to economic strain, developers have remained committed to delivering quality, well-managed housing with attractive amenities in desirable locations. She said the multifamily model has proven itself to be low risk and defensive in nature when well managed by strong operators, as well as adaptable and responsive, bolstered by innovation in property management and a surge of interest from both local and international players. 'The residential property market is a major contributor to the South African economy, playing a pivotal role in supporting growth, job creation, and meeting the evolving housing needs of a diversifying population,' notes the CAHF report. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ For the sector to realise its full potential, Dieperink said, process and structural inefficiencies must be addressed and capital unlocked. She said institutional players, lenders, and policymakers must collaborate to accelerate delivery, scale developments, and enhance regulatory support. Absa CPF said it has been instrumental in supporting the rise of multifamily developments, especially within the affordable housing segment. Over the past decade, it said it has focused on this high-growth area, providing financing solutions to investors and developers across the country while also enabling the transformation of urban centres such as Johannesburg's CBD. Here, obsolete office buildings have been revitalised into thriving, community-based residential spaces, it said. 'The social impact of this investment cannot be overstated. Beyond providing homes, these developments stimulate economic activity, improve safety, and bring dignity back to neglected urban spaces.' Absa added that it has also led the way in embedding sustainability within property finance. In 2023, the bank concluded a R4.5 billion transaction with the International Finance Corporation under the Market Accelerator for Green Construction (MAGC), the first in size of its kind in Africa. More than half of this funding was allocated to affordable housing projects, cementing Absa's position at the intersection of environmental and social impact. Yet, the bank said, despite the sector's momentum, one of its most pressing challenges remains the availability of data. 'Comprehensive, granular, and reliable data specific to the multifamily rental market is lacking. Investment-grade decisions depend on transparency, and for many institutional investors, the absence of detailed analytics has been a key barrier.' Recognising this, Absa said it sponsored the original MSCI compilation of residential sector data in 2018. More recently, alongside Divercity Urban Property Group, the bank co-funded two critical research studies commissioned by the South African Multifamily Residential Rental Association (SAMRRA), an emerging industry body representing thirteen major players who collectively own and operate over 75,000 units valued at over R40 billion. That figure alone represents 11% of the entire multifamily market. Dieperink said as investor sentiment shifts and appetite builds, the focus must now be on scalability. She said that with institutions such as the Public Investment Corporation(PIC) committing capital and financial institutions such as Absa providing finance, the growing imperative shifts to the increase in delivery of quality housing stock. 'Unlocking scale will further facilitate a residential-focused listed REIT structure, improving access to capital while offering the broader investment community a new vehicle for inclusive, impact-driven growth. "South Africa's multifamily rental sector stands at a defining moment. With the right blend of capital, data, and policy support, it has the potential to reshape the country's housing market and, in doing so, drive a broader economic and social transformation,' Dieperink said. According to Mordor Intelligence's South Africa Real Estate Market Analysis, the rental market continues to demonstrate resilience and attractive returns for investors, with gross rental yields in major metropolitan areas like Johannesburg ranging from 6.5% to 9.3%. The report said this robust rental market is particularly evident in urban centres where young professionals and students drive demand for rental properties. 'The market has seen a significant shift in rental preferences, with increased demand for properties offering modern amenities, security features, and proximity to business districts. Property investors are increasingly focusing on developing rental properties that cater to these evolving tenant preferences while maintaining competitive pricing strategies,' reads the analysis. Independent media Property
