2020 is well underway, and even as we cheer in the new decade there are significant challenges on the horizon- both for SA and the commercial property sector.
Political and economic stability is still not where it should be for consistent growth, which could have a negative impact on the commercial property sector. On the positive side, however, lower interest rates may help to boost sales as borrowing becomes cheaper.
In this article, we take a closer look at the factors that could shape our economy and property market in 2020.
Politics, the economy, and rating agencies
The past few years saw several challenges for the country, both political and economic. State capture, the crisis at Eskom, and most recently the SAA business rescue all weigh heavily on investor sentiment.
Economic growth, which is essential for the country’s development as well as the expansion of the commercial property sector, has been weak over the past few years. With 0.8% GDP growth predicted for 2020, there may be trying times ahead.
Analysts are particularly concerned about the ongoing management and capacity problems at Eskom, which was forced to implement stage 6 load shedding for the first time over the 2019 festive season.
- Despite numerous tariff increases and bailouts over more than a decade, the country’s main power supplier is still struggling.
- As reports of corruption and tender irregularities come out, the utility’s future is being questioned on a regular basis.
With the prospect of further government bailouts, economists are concerned that the crises at Eskom and SAA will force the Treasury to assume billions of Rand in debt – which will, in all likelihood, have a negative impact on our credit rating.
South Africa narrowly avoided a junk status downgrade last year, but if slow economic growth and a large government debt burden persist, a downgrade could become inevitable. This could weaken the Rand further and push inflation higher.
How will commercial property fare in 2020?
With a slow economy and slack consumer demand, commercial property may be in for a slow year in 2020.
The Reserve Bank’s recent decision to lower rates, which has dropped the repo rate below 10% for the first time in many years, could encourage buyers to put in offers on commercial property as the cost of borrowing decreases.
However, with slow growth and less than stellar occupancy rates it may be a challenge to convince potential buyers to take advantage of lower rates – and it’s a challenge that we’re ready to meet.
Think long-term, think positive when it comes to Cape Town commercial property
For many potential buyers, office space is an asset they would love to invest in – but the political and economic climate has them worried.
We’d like to encourage anyone in search of commercial property Cape Town to take a long term view and remember the positives that the Mother City has to offer:
- Good infrastructure and stable municipal finances
- A growing tech and entrepreneurial sector
- A variety of world-class office buildings and developments
- Consistent interest from foreign investors
- A reputation for innovation and an international reputation for quality of life
In the long term, South Africa is more likely than not to overcome its economic challenges and return to growth. For now, there are some excellent opportunities to invest in commercial property at competitive prices.
If you’d like to learn more about our portfolio of Cape Town office space, contact us today.