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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2019-03-22

Smart Properties at the Forefront

With Eskom load shedding becoming a daily occurrence and the cost of electricity accelerating - the recent announcement of a 9,4% electricity tariff hike in 2019 by the national regulator, means that electricity's share of total property operating costs can be expected to accelerate further.

The CPI for electricity over the past decade has far exceeded the general CPI rate - as at January 2019 the CPI for electricity was at 7.63% vs the overall CPI rate of 4%. When considering the cumulative electricity CPI since the 1st quarter of 2008 to the final quarter of 2018, a staggering 274.45% increase in the cost of electricity becomes evident.

By comparison the CPI for water and other non-electricity tariffs (such as municipal rates) has inflated by 147.16% over this period. Headline CPI inflated by 79.55% over this period.

These administered tariffs have therefore become the main cost impacting on property ownership and has implications in terms of residential and commercial property development and ownership.

Energy efficient design and technology will have to become the norm for every new development and the active implementation of alternate energy sources essential to being able to curb the cost of electricity within a property investors budget and the reliance on Eskom electricity.

The sooner we are all off the grid the better. The average size of new residential flats and townhouses can be expected to decrease further in an attempt to lower the purchase and running costs.

As the cost of electricity increases as a share of a typical households' budget, disposable income is crowded out and other line items lose out due to the ever increasing size of the typical electricity account.

For commercial property, the component of electricity costs of property operating costs has risen, according to FNB, from 21,1% in 2007 to 31,1% in 2018. When a third of your operating cost is consumed by electricity within a business this becomes a big deal and the pressure to find energy efficient or alternate solutions increases proportionately.

Covering of large areas of roof structures with solar panels will become the norm for most commercial properties. Architectural design will have to move away from glass bowls exposed to harsh sunlight that generates heat to roof-scapes with large overhangs that shield the internal spaces from the heat load.

Insulation to keep an internal space cool in summer and warm in winter will become ever more important.

Innovation is often fueled by a pressing need. For South Africans having to deal with a delinquent and dysfunctional energy utility may well prove to be a blessing in disguise when we develop energy efficient homes and work spaces as a result that are no longer reliant on the supply of over-priced electricity from Eskom.