South African Residential Market Sees Mixed Recovery
News: The price index for a medium-sized apartment in South Africa rose by 0.2% year-on-year in the 12 months to Q213, according to Property Showrooms. The growth rate dropped from 2.86% in Q1 and 3.33% in Q412. Demand is said to be rising in the residential sector, with more people entering the mortgage market and more building plans approved in H113.
BMI View: Commercial real estate is dependent on a healthy macroeconomic environment. South Africa's economic prospects have deteriorated amid rapid currency depreciation and rising tensions in the critical mining sector. We forecast real GDP growth of 2.3% in 2013 and 3.3% in 2014, with risks weighted firmly to the downside. Poor economic growth affects the sector as it dampens both property fundamentals and capital markets, putting downwards pressure on tenant retentions, rental growth, yields, development activity, financing and asset values.