The major regions of South Africa where businesses suffer the most

Third quarter data from the ETF Commercial Real Estate Brokers Survey, which surveys a sample of commercial real estate brokers in South Africa’s six major metropolitan areas, shows a perceived decrease in levels of financial pressure; however, the rate of improvement is slowing which is of concern.

The data comes from brokers in the city of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, Ethekwini, Cape Town and Nelson Mandela Bay.

Focusing on the main drivers of movement and sales activity in owner-serviced properties, the survey results show that financial pressure remains by far the main driver. However, the latest quarterly reading indicated a slow continuation of the downtrend, a sign that financial pressure is gradually easing as the economy slowly recovers from last year’s deep foreclosure recession, said FNB real estate strategist John Loos.

Homeowners are still perceived to be selling or moving under the influence of financial constraints / pressures, i.e. 54.25% in the Q3 2021 survey. This figure is only slightly lower than the previous 55.35%. , but more significantly lower than the post-hard lockdown peak of 65.3% reached in the last quarter of 2020.

Factors determining owner-occupant movement and sales

Upgrade sales levels

In another selling pattern also perhaps reflecting financial constraints, sales and relocation to “bigger and better premises” remain very low at 13%, Loos said. This remains considerably lower than the 18.4% reading from the first quarter before the 2020 lockdown. However, it also showed a slight improvement from the 11.1% in the previous quarter, the strategist said.

“This percentage has been significantly lower since the start of severe lockdowns in the second quarter of 2020. It had admittedly already lost importance as economic and financial times hardened before the Covid-19 lockdown, but then declined much more noticeably in the second trimester. of 2020, to a low of 8.2%, as the foreclosure worsened the recession.

“The most recent figure of 13% therefore continues to reflect the combination of a difficult economic and financial period since the foreclosure began, combined with a cautious approach to real estate at a time when business confidence is still low. “

Move to better position yourself

Another key reason for selling, which may reflect both current financial pressures on businesses as well as risk aversion due to uncertainty about the economic future, is the estimated percentage of sellers selling in order to move closer to their market, the FNB said.

This percentage fell further slightly to 20% of total salespeople in the third quarter 2021 survey, the lowest percentage since the start of the survey, down slightly from 20.5% in the previous quarter and at 36.3% at the start of 2019.

“This suggests a ‘wait and see’ approach on the part of an increased proportion of aspiring salespeople. While it may often be wise to incur the cost of relocating closer to your market, in these weak economic times it is likely that the result will be less relocation and more “stay put” for now. ”Loos said.

Coastal metros seem to “outperform”

Looking at where by region the highest level of selling or offshoring related to financial pressure is perceived to be, Gauteng appears to have on average higher (worse) readings due in large part to the Tshwane region. Tshwane was highest in the Q3 2021 survey with 80% of sellers, while Greater Johannesburg was at 49.8% significantly lower.

Of the 3 coastal metros, the highest (worst) percentage was recorded by Cape Town at 54.3%, Ethekwini 48% and Nelson Mandela Bay the lowest at 28.5%.

Conclusion – Financial pressure continues to ease, but the pace of improvement appears to be slowing

Loos said the slowing pace of improvement from the previous quarter’s survey results was not entirely unexpected, as the economy itself saw a slowdown in the pace of its recovery from the lockdowns. severe in the second quarter of last year.

“The battle to achieve the last part of a ‘full’ recovery to return to pre-Covid-10 GDP levels is linked to the permanent shutdown of parts of the economy’s businesses, and therefore to a capacity economy scale smaller today compared to the days of pre-containment.

“In addition, existing businesses suffered a significant financial shock during the deep recession of 2020, so business confidence remains low, so they don’t necessarily move quickly to expand their own production capacities. Therefore, we are sitting with an economy even smaller than in 2019, and significant financial pressure on the corporate sector continues as a result. “

Read: Sharp increase in business bankruptcies in South Africa

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