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Moneyweb SeminarHyatt Regency Oubaai, George       5 October 2011         Erwin Rode          www.rode.co.za
World prospects1.   Financial crisis has resumed2. And: USA and European growth   prospects must be poor for many   years ...
ANYTHING THAT CAN’T GO ON FOREVER WILL END       - Herb Stein
Medium-term prospects for      SA economy1. Lower growth in the wake of low world   growth and infrastructure constraint i...
Real property cycle                            Johannesburg office rents vs national house pric es                   180  ...
Real U.S. home values                   180                            Compound growth rate of trendline: 0,6% p.a        ...
Real S.A. home values                   300                          Compound growth rate of trendline: 0,4% p.a          ...
Growth in S.A. house prices                   20                   15Growth (%,y-o-y)                   10                ...
Flat rentals                                        George vs Cape Town total                     160                     ...
Real house prices vs real flat rentals                                                       (Deflated by Haylett)        ...
Ratio of household debt                                       to disposable income                 90                 80  ...
Growth in                                                   real retail sales                    15                    10G...
Shopping-centre                                                  vacancy rates                   10                       ...
Office vacancies                              Cape Town CBD vs Cape Town decentralized                                    ...
Nominal grade-A office rentals                               Cape Town CBD vs Cape Town decentralized                   10...
Industrial vac ancies                                      Central Witwatersrand vs Cape Peninsula                        ...
Nominal prime industrial rentals (500m² units)                                     Cape Peninsula vs Central Wits         ...
National capitalization rates                               by property type    14              Smoothed    13    12    11...
Long-bond yields                                               vs                                            PLS yields   ...
1. The American locomotive has run out of steam2. Expect below-average economic growth in SA for many years to come3. Resi...
Rode’s products1.   Valuations2.   Rode’s Growth Points (annually)3.   Rode’s Sales (monthly)4.   Rode’s Report (quarterly...
Erwin Rode on Prospects for Property
Erwin Rode on Prospects for Property
Erwin Rode on Prospects for Property
Erwin Rode on Prospects for Property
Erwin Rode on Prospects for Property
Erwin Rode on Prospects for Property
Erwin Rode on Prospects for Property
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Erwin Rode on Prospects for Property

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Transcript of "Erwin Rode on Prospects for Property"

  1. 1. Moneyweb SeminarHyatt Regency Oubaai, George 5 October 2011 Erwin Rode www.rode.co.za
  2. 2. World prospects1. Financial crisis has resumed2. And: USA and European growth prospects must be poor for many years — think 10 years
  3. 3. ANYTHING THAT CAN’T GO ON FOREVER WILL END - Herb Stein
  4. 4. Medium-term prospects for SA economy1. Lower growth in the wake of low world growth and infrastructure constraint in SA2. But, China factor3. Taxes and tariffs set to rise to catch up with backlogs4. Thus, disposable income under some pressure
  5. 5. Real property cycle Johannesburg office rents vs national house pric es 180 Deflated by BER BCI 160 140Index (1990=100) 120 Forecast (log scale) 100 80 H o use p r ice s O ffice r e nta ls 60 65 70 75 80 85 90 95 00 05 10 15 Source: Absa; BER; Rode forecasts
  6. 6. Real U.S. home values 180 Compound growth rate of trendline: 0,6% p.a 160 140Index (2000=100) 120 100 80 60 40 20 0 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Source of data: Irrational Exuberance, Robert Shiller
  7. 7. Real S.A. home values 300 Compound growth rate of trendline: 0,4% p.a 250Index (2000=100) 200 150 100 50 0 1966 1968 1970 1972 1974 1976 1978 1980 2006 2008 2010 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Source of data: Absa; Stats S.A
  8. 8. Growth in S.A. house prices 20 15Growth (%,y-o-y) 10 +5% 5 0 -5 07:01 07:07 08:01 08:07 09:01 09:07 10:01 10:07 11:01 11:07 Source of data: Absa
  9. 9. Flat rentals George vs Cape Town total 160 150 G e o r ge Ca pe T o wn to ta l +4% 140Index (2005q1=100) 130 +4% Log scale 120 110 100 Sm o o the d 90 2005 2006 2007 2008 2009 2010 2011 Source of data: Rodes database
  10. 10. Real house prices vs real flat rentals (Deflated by Haylett) 240 220 Real house prices Real flat rentals 200 180Index (1990=100) (log sacle) 160 140 120 100 80 75 80 85 90 95 00 05 10 15 Source of data: Rode; Absa; Stats SA
  11. 11. Ratio of household debt to disposable income 90 80 78%Percentage (%) 70 60 50 40 70 75 80 85 90 95 00 05 10 Sour ce of da ta : SARB
  12. 12. Growth in real retail sales 15 10Growth (%; y-o-y) 5 2% 0 -5 Smoothe d -10 04 05 06 07 08 09 10 11 Sour ce of da ta : Sta ts SA
  13. 13. Shopping-centre vacancy rates 10 Re giona l 9% Ne ighbo urhood 8Vacancy rate (%) 6 4 3% 2 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Source of data: I.P.D. Annual Digest
  14. 14. Office vacancies Cape Town CBD vs Cape Town decentralized (Grade A and B combined) 20 Cape Town dec. Cape Town CBD 16Vacancy rate (%) 12 10% 8 4 7% 0 00 01 02 03 04 05 06 07 08 09 10 11 Source: SAPOA
  15. 15. Nominal grade-A office rentals Cape Town CBD vs Cape Town decentralized 100 Cape Town CBD (+5%) 80 Cape Town dec. (+3%) 60R/m² (log scale) 40 20 94 96 98 00 02 04 06 08 10 Source of data: Rodes Time Series
  16. 16. Industrial vac ancies Central Witwatersrand vs Cape Peninsula 4.5 Sm o o the d 4.0 3.2 (7%) 3.5Vacancy scale ( 0 - 9) 3.0 2.1 (4%) 2.5 2.0 1.5 Ce ntr a l Witwa te r sr a nd Ca pe P e ninsula 1.0 00 01 02 03 04 05 06 07 08 09 10 11 Source of data: Rodes Time Series
  17. 17. Nominal prime industrial rentals (500m² units) Cape Peninsula vs Central Wits 40 Cape Pe ninsula (+8%) Ce ntr al Witwate r srand (+2%) 30R/m² (log scale) 20 10 Smoothed 90 92 94 96 98 00 02 04 06 08 10 Source of data: Rodes Time Series
  18. 18. National capitalization rates by property type 14 Smoothed 13 12 11% 10 9 Re gio na l sho pp ing ce ntr e s 8 I ndustr ia l le a se ba ck s D e ce ntr a lize d o ffice s 7 90 92 94 96 98 00 02 04 06 08 10 Source of data: Rodes Time Series
  19. 19. Long-bond yields vs PLS yields 20 r² = 0,68 Bonds 18 PLSs 16 14Yields (%) 12 10 8 6 4 00 01 02 03 04 05 06 07 08 09 10 11 Source of data: Rodes Time Series; Bond Exchange of SA
  20. 20. 1. The American locomotive has run out of steam2. Expect below-average economic growth in SA for many years to come3. Residential property is still overpriced4. Shopping-centre cash flows will remain under pressure, especially the smaller ones5. Nationally, quality non-residential properties are moderately oversupplied but not overpriced6. Taking a 3-year view, listed funds’ distributions will decelerate to … say, 4% p.a. and a negative rerating may take place in tandem with long bonds
  21. 21. Rode’s products1. Valuations2. Rode’s Growth Points (annually)3. Rode’s Sales (monthly)4. Rode’s Report (quarterly)5. Rode’s SA Property Trends (semi-annually)6. Rode’s Retail Report (quarterly)7. Ad hoc consultancy
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