by DION HENRICK
CAPE TOWN, (CAJ News) – THE Ukraine conflict is projected to have adverse impacts on the South African property market.
This is according to an analyst, who noted the impact on this sector could emanate from the war’s effect on the economic.
The forecast by John Loos, Property Strategist at FNB Commercial Property Finance, comes days after Russia invaded Ukraine.
He noted while it is too early, and the future path of the conflict is too uncertain, to say with confidence what the magnitude of the economic and property market impact could be, there were some seemingly obvious potential impact points.
The expert noted upside inflation, upside interest rate risk and downside economic growth risk as the basic macroeconomic risks that appear to emanate from the Ukraine War.
Loos said South Africa’s economic situation is fragile, so any major global recessionary impact on the domestic economy could easily see vacancy rates rising once more.
While industrial property might weather economic challenges, the fragile retail and office sectors, challenged by increasing online retail and greater remote working respectively, could see renewed weakness that could return them to rising vacancy rates and further downward pressure on rentals.
The analyst said with risks of additional upward pressure on capitalization rates via long and short interest rates, and on vacancy rates via the economic impact translating into downward pressure on rentals, the Ukraine conflict looks to be a source of negative pressure on property valuations.
Loos said the potential war impact on the domestic residential rental market is tough to call, depending on the magnitude of the conflict.
“In short, the Ukraine war impact remains highly uncertain, with much depending on how long it continues, its final outcome result, and what happens in terms of global sanctions, boycotts and reaction to them,” he stated.
For property, he said, the main potential impact points are via upward pressure on cap rates, upward pressure on vacancy rates, downward pressure on rentals and thus property incomes, as well as possible additional upward pressure on operating costs.
– CAJ News