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Property sector is flat!When will it pick up??

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Not applicable
Growthpoint and the like have not bee able to push the envelope in this rate cycle,looks as if everyone wants to look at the cash cow but not interested in buying some.When will the sentiment change??
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14 REPLIES 14
louisg
Super Contributor
Barry, you're the resident property expert. What are your thoughts on the property sector on a 2-3 year view? With the nature of lease agreements in SA, with built-in escalation clauses,long lease terms,etc, would the sector lag the general economy and only be reflected in earnings in a couple of years time? OR do they feel the earnings pressure sooner? I would appreciate your thoughts.
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SIMBA
Super Contributor
Last year we carried out in excess of R14,000.000.00 worth of tenant instalations, for s.b.p. alone. So far this year we have not reached R1,000.000.00. Companys are shy to sign long leases althought we are tendering for owner buyers on the smaller comercial props in J.H.B.
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HateGauteng
Super Contributor
Property is worth 10-50% of what the seller thinks it's worth. Get over it!!!!
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barry_1
Super Contributor
Funny(not ha ha!) you should ask that this morning as for the first time in three months i bought property loan stock.It was REDEFINE now doubling my holding.I am also looking at SACorp Property.Of course the "CONSENSUS" consisting of one person tips it as a SELL.I have studied their balance sheet and had a look at their new board and to say the least i am impressed.It is a PUT so they do not state the earnings yeild,but the interest is in the region of 11%.p.a.RDF will now absorb APEXHI and Madison,and become the largest property trust out there end of June if regulatory authorities don't cause further delays.Really the competition tribunal is becoming over protective!....Once RDF is one company,then certain indexes (here and overseas) will be forced to buy it so helping its price increase.
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barry_1
Super Contributor
sorry got carried away.Yes the major trusts have paid slightly less fof late ,but are likely to start edging up again from the last quarter of he year.
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barry_1
Super Contributor
Maybe,thats where property that is already on the market scores as it now becomes uneconomic to build new commercial,industrial and privite buildings and thats why then the rates start to rise as business starts to pick up!
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Shaun_Siddall
Super Contributor
Commercial property is all about rentals and yeilds. Gone are the days when rate psqm was used to value properties. Guys still think they can sell on a 8 or 9% yeild but buyers are only starting at 11% and this is for blue cheap ten year leases. Vacancies up, rentals falling = decreasing property valuations.
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Shaun_Siddall
Super Contributor
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louisg
Super Contributor
Yes, Redefine will come under buying pressure because of it's new size. Is it already in the price though?
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Not applicable
I don't think so, because I don't know how you would pin a value on expected volumes. What is interesting with redefine, is that not a helluva lot of volume changed hands during the 2008 selloff, implying that institutions were holding on for the longer term. this is reflected in the flat OBV. This last week, the selloff has been in large volumes, so I personally doubt that any pricing expectations are priced in.
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louisg
Super Contributor
Good observation. Thanks skaaptjop. Will Redefine be big enough to force the international property asset managers to buy in?
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barry_1
Super Contributor
Last year ,the answer would have yes as 20 billion capital was the target.I believe there is a new higher target this year,but have no idea what, at this stage.
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Not applicable
Why would international investors be 'forced' in? I understand index tracking funds here, but why internationals?
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louisg
Super Contributor
Won't the international property unit trust managers(international investors) be "forced" to buy Redefine if/when it forms part of certain international property indexes? Won't their mandates "force" them to buy Redefine?
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