In South Africa, the commercial property market moves through various cycles, which vary in terms of classification and timing.
Longer commercial property cycles are referred to as construction cycles, and these occur on average every eighteen years. Interspersed between these long cycles are short-term or investment cycles that usually last between five to ten years.
Although it is difficult to forecast the timing of these property cycles accurately, vacancy rates across the various asset classes can be an important indicator for commercial property investors who are looking to predict the best time to buy or sell commercial property.
In general, the best time to purchase property is at the bottom of the cycle, which we are experiencing now. However, securing funding in these conditions can be a challenge because funders are hesitant to take on risk in a tougher economic climate - particularly from a development perspective.
The delivery of development stock late in the property cycle can also be dangerous, as these assets may only come to market once the property cycle is on a downward phase.
Interest rate cycles also play a vital role to the success or failure of property owners and investors alike. Increasing interest rate cycles especially can cause havoc within the property market. If you're a property holder, make sure that you avoid cash flow strains through tougher market conditions.
If you have any queries relating to investment property or commercial property funding contact Simon Black (083) 261 2861.