Property

Good news for South African property owners

Rising demand in key property markets in South Africa is good news for property investors, as several segments are now considered undersupplied.

The FNB Commercial Property Broker Survey for the second quarter of 2024 brings encouraging news for South African homeowners, particularly those invested in the commercial property market. 

The survey gauges broker perceptions of property investor demand relative to supply. It revealed that two of three major commercial property markets are now perceived as “under-supplied”. 

This shift indicates burgeoning demand that outstrips supply in both the Industrial and Retail Property Markets, with Cape Town showing the strongest demand-supply balance overall.

The survey covers South Africa’s six major metros: Johannesburg, Tshwane, eThekwini, Cape Town, and Nelson Mandela Bay.

It found that the retail property market has shown considerable strength, vying with the industrial property market for the position of the strongest commercial property sector. 

Demand in the retail market now exceeds supply, marking a positive shift.

The industrial property market, especially in the coastal metros of Cape Town and eThekwini, has also seen demand significantly outpace supply. Cape Town leads with the strongest demand-supply reading.

Despite improvements in other sectors, the office property market remains oversupplied across all major metro regions, except for Cape Town, which has recorded a positive demand-supply rating.

The City of Cape Town stands out as a beacon of positive demand-supply balance across all three commercial property sectors. This trend underscores the region’s robust economic activity and well-functioning local government services. 

In contrast, the Greater Johannesburg region continues to struggle with oversupply in the industrial and office property markets, indicating weaker demand.

John Loos
FNB property strategist John Loos

The survey also examined the average time properties remain on the market before being sold, which indicates market strength. 

For the second quarter of 2024, occupied industrial properties averaged the shortest time on the market at 13.48 weeks, with vacant industrial properties close behind at 14.24 weeks.

Retail properties averaged 16.65 weeks on the market for occupied spaces and 17.24 weeks for vacant ones.

The office property market showed the longest average time on the market, with occupied properties taking 24.5 weeks and vacant properties 25.19 weeks to sell.

These figures suggest a strengthening in the industrial and retail markets, with brokers perceiving a decline in the average time properties spend on the market. 

Conversely, the office property market has seen a slight increase in time on the market, reflecting its ongoing challenges.

The survey’s demand versus supply perceptions revealed that both the industrial and retail property markets are perceived as under-supplied, with more respondents indicating that demand exceeds supply.

The office market sector remains significantly oversupplied, reflecting a market imbalance that needs addressing.

Overall, the outlook for the second half of 2024 appears promising. The expectation of lower interest rates, reduced global inflation, and improved domestic economic performance all point towards a potential strengthening in property investor demand. 

Furthermore, the formation of a Government of National Unity has been perceived positively by investors, which could further boost market confidence.

This cautious optimism is reinforced by the survey’s findings on building plans and market activity.

Recent building plan statistics from StatsSA revealed that, for industrial properties, building plans passed for the 12 months to April 2024 were 32% lower than pre-Covid-19 highs, indicating cautious optimism and measured growth.

Similarly, building plans for retail properties were 32.5% lower than their multi-year high.

The office property sector saw the most significant decline, with building plans 71.4% lower than their peak in June 2017, reflecting the sector’s ongoing oversupply issues.

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