South African properties offered investors a 30% return last year, pitting the country as potentially the best performer within the international property market.
Research conducted by UK-based Investment Property Databank (IPD) released last week showed that SA achieved twice the average return of the member countries that have already reported their growth figures for last year..
The UK achieved a 19,1% total return and Canada 18,7%.
At the bottom of the scale were Sweden with 12,7% and the Netherlands with 10,2%.
South African commercial direct property trailed local equities, which soared 47,3% last year, but outperformed the 9,6% yield achieved by bonds.
However, IPD SA MD Stan Garrun said while investors were increasingly looking across national borders to generate superior returns, yield compression in SA was mainly spurred by domestic demand rather than international interest.
IPD SA is an independent operating subsidiary of the UK company. It was established four years ago
Internationally, IPD measures property performance and operates databanks in Canada, Denmark, France, Germany, Ireland, the Netherlands, Norway, Portugal, SA, Spain, Sweden, Finland, Switzerland and the UK. The information enables researchers to analyse properties with the same techniques applied to equities and other financial assets. IPD neither invests in nor offers advice on the property market.
The IPD SA index covers more than 70% of SA's investment property market, providing local and foreign investors with an informed basis for assessment of local conditions.
Garrun said this was the third successive year that the property market had achieved "stellar performance", beating bonds and cash last year and closing in on equities over the long term.
He attributed the growth to an improving socio-economic balance and empowerment that put the sector on a sound footing with other investments.
The large fund international investors were still absent, although there were signs that foreigners were poised to move into the local market.
"SA is enjoying a period of great stability and economic growth. Strong commodity prices and rising business and consumer confidence are buoying Africa's largest economy," said Garrun.
Last year, gross domestic product growth was 5% against a 4,3% forecast, while inflation declined to 3,4%.
In July, global rating agency Standard & Poor's afforded the country an A+ ranking, one notch higher than the Czech Republic, which currently holds international appeal for institutional property investors.
At the time S&P credit analyst Beatriz Merino said the upgrade reflected SA's strong track record of macroeconomic management and improved prospects of sustainable higher GDP growth rates.
Garrun said the total return was boosted by a surge in capital growth to 18,1% (2004: 11,7%) with the compounded income return dipping to 10,3% (10,6%).
Property vacancies receded to 5,3% (7,8%) as demand surged on the back of a strengthening economy.
Industrial properties showed the strongest performance, returning 33,1% (24,4%). Capital growth nearly doubled to 18,6%.
Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge
