Top Adding - Real Estate

SA property to slow down in 2007

Leading South African property experts say 2007 may be the low water mark before prices start increasing again in 2008, albeit

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

at a more subdued pace than the heady heights of 2004/05.

Property experts Christo Lu?s from Absa, SA's biggest mortgage lender, and John Loos from FNB, say tha

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

t while 2007 should see slower and lower property growth, a turning point northwards should come in 2008 as the interest rate cycle potentially turns.

"At best

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

we could have cheaper property in 2007, but the market should still average 8-9% and then from 2008 onwards we should be back in double digits," says Loos.

Chie

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

f economist from Absa, Lu?s, says that property growth is "still strong" at 12.7% year-on-year (y/y) at last count according to the Absa House Price Index, but t

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

hat "there has been easing", pointing to higher inflation as an inhibiting factor.

According to Loos factors that will start stirring the market once again will

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

be when interest rates potentially come down in 2008 and as economic growth continues at current strong levels.

"There is also the possibility of a supply side

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

crunch because there is a lot on the plate for the commercial sector and it will remain this way for the rest of the decade," he adds.

Lu?s points to the fact

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

that in 2004/05 there were stages when South Africa experienced property growth of more than 30%. "However, we can expect a slowdown in 2007 as potentially infla

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

tion will remain a problem in the first half of 2007 and we shouldn't see any real increases," he explains.

"This should be the situation for most of 2007 - at

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

least for the residential sector where we should see some consolidation," he points out.

"As we move into an environment of slightly lower interest rates, possi

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

bly at the end of 2007 - although we think mid-2008 - we could see it pick up again," says Lu?s.

"There should still be strong growth in certain types of proper

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ty in 2007, but overall prices should ease," he adds.

"In some areas there could actually be a decline, but not in general terms. We should see a single-digit b

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ottoming in nominal terms, picking up later in 2007. Then when interest rates potentially move lower, we should get more growth," explains Lu?s.

"I don't think

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

we will easily see the high growth rates of 04/05 unless the correction is to such an extent to justify it," concludes Lu?s. Loos concludes that better performan

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ces in 2007 could come lower down in the price ranges.

"The lower end is where the action will be. It's difficult to make an exact cut-off, but around R1,5 mill

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ion rand and up should grow the slowest," he states.

Nominal house price growth in South Africa has been in a downward phase for the past two years after peakin

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

g at 35.4% year-on-year (y/y) in October 2004, according to Absa research.

Standard Bank's House Price Index for November registered house price growth unchange

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

d at 8% y/y, coming off a low base of just 2.9% in September.

A potential interest rate increase in the new year will add to the 200 basis points accumulated in

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

2006 during the current tightening cycle which began in June, and many analysts expect this to be the last rate hike in the cycle.

Evan Pickworth - I-Net Bridg

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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