In a stagnant economy with declining real rentals, property operating costs become more of an issue in recent years
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GUEST – John Loos, senior economist: commercial property finance at FNB
Heads of some of SA’s major listed property funds have recently been highlighting the challenge of municipal rates and utilities tariffs that continue to rise in excess of general price inflation rates. This is becoming troublesome for tenants and property owners as they contribute to operating costs eating into a rising portion of property income.
It has been made worse in recent years by property income growth coming under pressure from a long-term economic stagnation. Further weakening in national property real values and heightened business migration in search of a ‘better deal’ seem the likely outcome. But can such increased regional competition for household and business ratepayers ultimately lead to improved service delivery in places? By its own historic standards, property in SA is still expensive, albeit correcting slowly over time. It became expensive during the early 2000s as a massive interest rate reduction, and significantly improved business environment in the post-sanctions and boycott years, boosted economic growth to above 5% at a stage prior to 2008.
Heads of some of SA’s major listed property funds have recently been highlighting the challenge of municipal rates and utilities tariffs that continue to rise in excess of general price inflation rates. This is becoming troublesome for tenants and property owners as they contribute to operating costs eating into a rising portion of property income.
It has been made worse in recent years by property income growth coming under pressure from a long-term economic stagnation. Further weakening in national property real values and heightened business migration in search of a ‘better deal’ seem the likely outcome. But can such increased regional competition for household and business ratepayers ultimately lead to improved service delivery in places? By its own historic standards, property in SA is still expensive, albeit correcting slowly over time. It became expensive during the early 2000s as a massive interest rate reduction, and significantly improved business environment in the post-sanctions and boycott years, boosted economic growth to above 5% at a stage prior to 2008.
