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| Building Stocks on the Blocks |
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South Africa's construction boom is expected to continue for at least the next 10 years thanks to government investment and private-sector spend
Given the positive growth and earnings outlook and recent fall in prices, say analysts, construction stocks could be ripe for the picking, despite them trading at a premium to the overall market.
The average price-earnings multiple for the construction and materials index was 21.7 at the beginning of the year, and is now 17.1 times earnings; this compares with the all-share's average multiple of 16.7 times earnings.
For the year to date, the construction and materials index has fallen 6.2% while the all-share index is up 11%. The series of all-time highs reach in May mask the market corrections seen February and March.
Analysts say construction companies do not look expensive for investors who are taking a bullish view of growth in the industry.
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| Cape Town Continues to Reap Benefit of Urban Regeneration |
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How much investment has the Cape Town Partnership (CTP) indirectly or directly been able to able to attract to city?
Urban decay and the resultant disinvestment by landlords who choose to move to decentralised areas is a problem in many countries around the world. South African cities have not been exempt from this degeneration however a number of organisations in various areas are working to reverse this trend. Karen Kühlcke spoke to Andrew Boraine, chief executive of the Cape Town Partnership, to find out how urban regeneration in the Cape Town CBD has resulted in increased investment in the City. The work of the Cape Town Partnership (a multi-stakeholder forum) and the Central City Improvement District (CCID) has been instrumental in tackling the crime and grime and turning the tide in Cape Town.
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| Building Industry Should Not Bear Brunt of Energy Crisis |
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Property economist Erwin Rode of Rode & Associates has strongly condemned Eskom’s decision earlier this year to impose a six-month moratorium on all new medium- to large-scale construction projects across both the residential and non-residential markets
While existing long-term projects have yet to feel the full impact of the energy crisis, Eskom’s recent decision is already having an effect on professionals throughout the building industry, says Rode, escalating a situation which began two years ago when interest rates began their steep and sustained rise, construction input costs rose and consumer demand fell. By February this year – well before the full impact of the energy crisis began to take its toll – year-on-year growth in overall building plans passed had already declined sharply by 22,9%. Cement sales, a good proxy for building activity, are for the first few months of this year already showing a decline of about 1%.
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| Cape Town Wins Oscar at World Travel Awards |
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Cape Town has been announced as Africa’s leading destination by the prestigious World Travel Awards in Durban
The World Travel Awards were established in 1993 to acknowledge, reward and celebrate the enormous achievements in all sectors of the global travel industry. Travel professionals and their clients regard the awards as the best endorsement that any travel product could receive. Globally, it is considered the Oscars of the travel industry. The spectacular awards ceremony was held at the Inkosi Albert Luthuli Convention Centre (ICC) in Durban.
Councillor Simon Grindrod, Cape Town’s Mayoral Committee member for Economic, Social Development and Tourism said: “This award further consolidates the position of Cape Town as a world-class tourist destination. Credit must go to our local hospitality industry for working so hard to provide an excellent tourist offering in terms of product and service.”
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| House Price Growth at an 8-Year Low |
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Property Trends - House Price Index
According to the latest Absa House Price Index, house price growth slowed to a nominal
6,8% year-on-year (y/y) in the middle segment of the market (see explanatory notes) in
April 2008, down from a revised 7,8% in March. It was the fourth consecutive month of
single-digit growth in nominal house prices since a growth rate of 11,2% was recorded in
December last year. The latest price rise of 6,8% y/y was the lowest since November
1999, when it was 6,5%, and brought the average price of a middle-segment house to
about R974 000 in April this year.
In real terms, house prices in the middle segment of the market dropped by 2,5% y/y in
March 2008, compared with a decline of 0,9% y/y recorded in February, based on
headline CPI inflation. This was the biggest negative real year-on-year growth rate
recorded in house prices since May 1997, when it was at a level of -3,4% y/y, based on
nominal price growth of 5,7% y/y, and a headline CPI inflation rate of 9,5% at the time.
| Absa Group Economic Research, 08-05-2008 |
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| Property Market Must Get Greener |
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According to property economist and university lecturer Francois Viruly, South Africa's architects, developers, construction companies and curricula are not handling green issues
"The real estate industry curricula tell their students to close the tap at best," he says. "The finance courses don't go into the financial implications of good practice. So the question that has to be addressed is how do we bring 'green' issues into our curricula and general consciousness."
This news does not bode well in view of what Huston Eubank, a registered architect specialising in the sustainable design of buildings, communities and businesses, and who served as executive director of the World Green Building Council from 2005 to 2007, has to say on the green movement, and in particular green buildings. His focus is on buildings because they contribute to approximately 20% of global carbon dioxide emissions.
| World Green Building Council, 03-05-2008 |
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| Cape Rental Property Booms as Rates Bite |
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The Cape Town inner city is becoming a trendy home address for professionals who work in the CBD
Inner city apartment rentals in the Cape Town CBD are in demand. This is the consensus of Seeff agent specialists of the Atlantic Seaboard, CBD and City Bowl area seeing a shortage of rental stock and abundant tenant interest.
“The continuing interest rate increases and the new credit act make it difficult for new buyers to obtain and sustain a home loan. Rental increases are higher than a year or so ago, but it is still more affordable to rent than to buy an upmarket apartment in a new development,” says Rouxlé Marais. She is the Rentals and Home Management Services Manager for Seeff Atlantic Seaboard, CBD and City Bowl.
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| The House Party is Officially over for Now |
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There is much debate currently among property experts, with one camp predicting a continuing downward spiral for the foreseeable future, while the other maintains the current scenario is a bump on a road that will soon head skywards once again
The residential property boom of the early years of the decade – now already being looked back on with a measure of nostalgia – was a once-in-20-years experience. “We must remember that it came off a very low base to begin with, and coincided with the longest business-cycle upswing (which started in 1999) that the country has ever experienced,” says Rode. Healthy economic growth, combined with the lowest interest rates South Africans had seen for more than two decades further spurred on the market into a state of euphoria. “Euphoric expectations of growth are often self-fulfilling, and all these factors together resulted in sustained – but unsustainable – growth for a number of years that far exceeded the growth in income and replacement costs. Inevitably, this led to houses becoming increasingly unaffordable.”
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| Eco Innovators Honoured in Green Awards |
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Ecological integrity and planet-saving ambitions are among the traits of individuals and companies that have been honoured in the inaugural ‘Real Simple’ Green Innovation Awards
Established by Real Simple, a women’s consumer magazine, the Awards are aimed at creating awareness of ‘green’ products for the benefit of consumers, says the magazines’ editor Kerryn Fischer.
“Our research has consistently revealed that our readers want to live ‘greener’ lives but were unsure how to do so. So we set about equipping them with the information they need to do this by instituting a monthly green section in the magazine and initiating the Green Innovation Awards whereby we celebrate those products, individuals and companies committed to green ethics and principles,” she says.
| Real Simple Green Innovation Awards, 03-04-2008 |
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| Outages May Boost Green Building |
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Sweeping power outages across major cities have affected the commercial and industrial property development sector negatively, with many pointing to infrastructure constraints and a negative impact on business confidence as boding ill for the industry in the long-term
But it’s not all doom and gloom, believes SAPOA president Marna van der Walt.
“In a market that is correcting itself, there are always opportunities and it is how we plan to go forward – to face those challenges – that will make the difference,” she says.
Van der Walt, who is also CEO of property group JHI, reckons that the power outages might just provide the push needed for SA businesses to accelerate their green initiatives and catalyze more effective energy management to SA.
After all, she says, energy management is certainly not a trend that is unique to South Africa, but a very real part of the drive towards green building world-wide.
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