1. Moneyweb Seminar
Hyatt Regency Oubaai, George
5 October 2011
Erwin Rode
www.rode.co.za

2. World prospects
1. Financial crisis has resumed
2. And: USA and European growth
prospects must be poor for many
years — think 10 years

3. ANYTHING THAT CAN’T GO
ON FOREVER WILL END
- Herb Stein

4. Medium-term prospects for
SA economy
1. Lower growth in the wake of low world
growth and infrastructure constraint in SA
2. But, China factor
3. Taxes and tariffs set to rise to catch up
with backlogs
4. Thus, disposable income under some
pressure

7. Real property cycle
Johannesburg office rents vs national house pric es
180
Deflated by BER BCI
160
140
Index (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

9. Real U.S. home values
180
Compound growth rate of trendline: 0,6% p.a
160
140
Index (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

10. Real S.A. home values
300
Compound growth rate of trendline: 0,4% p.a
250
Index (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

11. Growth in S.A. house prices
20
15
Growth (%,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

12. Flat rentals
George vs Cape Town total
160
150 G e o r ge
Ca pe T o wn to ta l
+4%
140
Index (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: Rode's database

13. Real house prices vs real flat rentals
(Deflated by Haylett)
240
220 Real house prices
Real flat rentals
200
180
Index (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

15. 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

16. Growth in
real retail sales
15
10
Growth (%; 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

17. Shopping-centre
vacancy rates
10
Re giona l 9%
Ne ighbo urhood
8
Vacancy 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

19. Office vacancies
Cape Town CBD vs Cape Town decentralized
(Grade A and B combined)
20
Cape Town dec.
Cape Town CBD
16
Vacancy rate (%)
12 10%
8
4 7%
0
00 01 02 03 04 05 06 07 08 09 10 11
Source: SAPOA

20. Nominal grade-A office rentals
Cape Town CBD vs Cape Town decentralized
100
Cape Town CBD (+5%)
80 Cape Town dec. (+3%)
60
R/m² (log scale)
40
20
94 96 98 00 02 04 06 08 10
Source of data: Rode's Time Series

22. Industrial vac ancies
Central Witwatersrand vs Cape Peninsula
4.5
Sm o o the d
4.0 3.2 (7%)
3.5
Vacancy 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: Rode's Time Series

23. Nominal prime industrial rentals (500m² units)
Cape Peninsula vs Central Wits
40
Cape Pe ninsula (+8%)
Ce ntr al Witwate r srand (+2%)
30
R/m² (log scale)
20
10
Smoothed
90 92 94 96 98 00 02 04 06 08 10
Source of data: Rode's Time Series

25. 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: Rode's Time Series

26. Long-bond yields
vs
PLS yields
20
r² = 0,68 Bonds
18 PLSs
16
14
Yields (%)
12
10
8
6
4
00 01 02 03 04 05 06 07 08 09 10 11
Source of data: Rode's Time Series; Bond Exchange of SA

27. 1. The American locomotive has run out of steam
2. Expect below-average economic growth in SA for many years to come
3. Residential property is still overpriced
4. Shopping-centre cash flows will remain under pressure, especially the
smaller ones
5. Nationally, quality non-residential properties are moderately oversupplied
but not overpriced
6. 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

28. Rode’s products
1. Valuations
2. 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