Power cuts good for property in South Africa?

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While the energy crisis being experienced by the country will be negative for the economy and thus negative for property it might prove to be a "double-edged" sword in that it might be negative for property development but positive for property returns, according to FNB Home Loans Property Strategist John Loos.

Loos says that while the potential impact is almost impossible to quantify due to the amazing ability of humans to adapt – "so take the various financial estimates of the Eskom effect with a pinch of salt" - it is fair to say that there has to be some negative impact on business and economic growth.

However, because South Africa is relatively new to demand management both for electricity as well as for space, Loos says his feeling is that the business growth ceiling that Eskom places on South Africa is perhaps a little higher than what the alarmists would have one believe, for the time being at least.
"As a result, my view is that the 'Energy Crisis' will have a greater negative impact on the supply of new property stock in next few years than on business and economic growth. "The net effect of all of this, I believe therefore, will be positive for both commercial and residential property returns," he contends.

"From a property development point of view, however, I am far less optimistic, and the negative impact on the supply of new stock could be significant. This doesn't necessarily mean negative growth in new developments but merely slower positive growth than would otherwise have been the case," he says.
"Not all would be lost for the building construction industry, however, as a greater focus on alterations and additions to existing buildings could be stimulated by the power issue, as the drive towards 'greener' buildings and better space utilisation is stepped up," he adds.

Published By: Property 24

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