Exciting times for property entrepreneurs

"IT'S tangible, it's solid, it's beautiful. It's artistic, from my standpoint, and I just love real estate."
 
The above quote from US property tycoon Donald Trump as a budding entrepreneur might just sum up the appeal of the sector and with interest rates at record lows, there are plenty of opportunities for smart property entrepreneurs in years to come.
 
To put in context what a great investment property has been for investors, you only have to look at the success of retail property in South Africa.
 
"Since 1997 SA house prices have increased 421%, which is by far the highest of the 22 countries surveyed by The Economist," says First National Bank (FNB) CEO Michael Jordaan on microblogging service Twitter.
 
A look at the listed property sector, with opportunities emerging in the form of new funds and boutique asset managers aimed specifically at the industry, shows that there is still more in the property pipeline.
 
Earlier this year, Old Mutual Investment Group Property Investments announced it was planning to list a R12bn property portfolio on the JSE.

The portfolio included some of the best-known shopping centres in the country including the Gateway Theatre of Shopping in Durban, Pretoria's Menlyn Shopping Centre, Cavendish Square in Cape Town, Riverside in Nelspruit and Vincent Park in East London.
 
This will follow up the listing of the R750m Vividend portfolio, due before the end of November.
 
Johann Els, senior economist at Old Mutual Investment Group SA, says he believes that lower interest rates are here to stay for a while.
 
He says: "We expect the exceptionally low interest rates around the world to support a continued gradual recovery – both globally and in SA – as investment recovers and consumers repay their debt. SA consumers should continue to benefit from low interest rates and inflation for much longer than we had originally expected."
 
However, while property has presented many opportunities for entrepreneurs in South Africa it is all too easy to get in over your head and take on too much debt.
 
Recent history has been littered with failed property syndications and high-profile failures including Sharemax, King Financial Holdings and the embattled Abalengani.
 
However, Annabel Bishop of the Investec Group Economics unit points out that the National Credit Act has presented a "structural shift" in the way that South Africans have approached credit extension.

Bishop notes: "Before the NCA, households tended to take on more debt when they encountered difficulties in meeting their debt service obligations or in paying off current debt (such as in periods of rising interest rates), but this source of easy credit for the overindebted, or those with the potential to join the ranks of the overindebted, has ended."
 
A look at the annual report of small business financing house Business Partners makes for interesting reading.
 
When you consider that property is represented in a diverse range of industries including manufacturing, retail and tourism, you begin to appreciate just how big the sector is and how many opportunities there are out there.

Property management contributed 22.8% of the firm's revenue in the last financial year. Revenue increased by 4.2% from R96.6m in 2009 to R100.6m in 2010.
 
However, as Willem Bosch, the chief operating officer of the property management services business comments, times have not been easy with the global financial crisis.
 
In the annual report, Bosch told investors: "In the past financial year, trading conditions for most tenants were extremely harsh. As a result, many experienced cash flow difficulties, and either did not renew their leases on expiry or scaled down considerably on floor space.

"Tenants in the clothing, construction and motor manufacturing industries were particularly hard hit by the downturn in the economy, and this has resulted in an increase in the vacancies in that section of the portfolio."
 
 - Fin24

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
16.14
+0.9%
Rand - Pound
21.47
+0.4%
Rand - Euro
18.19
+0.4%
Rand - Aus dollar
11.52
+0.2%
Rand - Yen
0.14
+0.2%
Gold
1,786.96
-0.4%
Silver
23.01
-0.6%
Palladium
1,813.50
+3.5%
Platinum
966.45
+1.2%
Brent Crude
72.72
-11.6%
Top 40
63,680
+2.0%
All Share
70,094
+2.2%
Resource 10
65,785
+2.7%
Industrial 25
93,811
+1.0%
Financial 15
13,512
+4.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot