In September this year it was announced that the South African economy had slipped into its first technical recession since 2009. According to Stats SA this was due to a second quarter downturn of 0.7% in the gross domestic product.
Since this announcement, all eyes have been on October for the medium-term budget policy statement (MTBPS). With the new ‘unashamedly pro-growth’ Finance Minister Tito Mboweni at the helm, most outlooks now seem optimistic, although Minister Mboweni doesn’t seem to be painting a rosy picture for the forseeable future.
For the commercial property sector, a prolonged recession could result in an increased vacancy rate, reduced rentals with tenants looking to Landlords for rental concessions and a stagnation in capital growth. Current pricing structures may have to be addressed if supply begins to outstrip demand in the owner occupier market. Managing Director of Swindon Property, Andrew Dewey says “Knowledgeable brokers are key to guiding both parties and striking a balance between requirement and budget”. In the Investment market Sellers are starting to take note of the required cap rate adjustments based on the current economy. Earlier this month The World Bank announced Cape Town as the top city of opportunity in Africa in its “Doing Business in South Africa” report. “This high praise will surely be an advantage for property in the Cape Town metro” says Dewey.
Credit Rating Agency, Moody’s is set to respond shortly to the strong intentions set out in the MTBPS. It is understood that an improved perception of the country, will strengthen business in general and the commercial property market specifically.