South African Property Returns Up in 2007
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South African listed property returned 27,7percent last year, slightly higher than 27,1 percent in 2006, but yields continued to fall across all sectors, a new survey showed. The 2007 South African Property Owners' Association/IPD SA Property Index – which surveyed 70 percent of the total property assets, held by financial institutions and property companies - showed that the last three years had seen the highest returns in the history of the index. The sector outperformed the equity and body markets in 2007, which returned 19,2 percent and 4,2 percent respectively.
The strong return was mainly driven by capital appreciation, which at 17,7 percent is the second highest recorded. Income return of 8,6 percent was slightly down on the 2006 value of 9,2 percent, due to capital values realised. Capital growth is underlined by a combination of income growth of 17,6 percent - the highest in IPD history - and a further reduction in vacancy levels at only 3,1 percent. But yields continued to fall in all sectors, with the all-property yield down 7,6 percent at the 2007 year-end. Top performing sector in 2007 was industrials with a total return of 33,6%, followed by offices at 30,8 percent and retail at 26 percent.
The survey also showed that local property returns were ahead of the nine countries covered by IPD index so far. New Zealand returned 22,4 percent, Australia returned 18,1 percent, Canada returned 16,1 percent, Sweden 14,9 percent and Finland returned 11,3 percent. Other IPD index results were Netherlands at 11,3 percent, Denmark at 10,2 percent, Ireland at 9,9 percent and the UK at –3,4 percent. "Returns in 2007 remained strong, buoyed by surging demand combined with supply-side constraints," said Stan Garrun, MD of IPD SA. He added that the retail sector dipped on slower consumer spending, while offices industrials powered ahead on strong fundamentals.
"Vacancy rates are now incredibly low across the board and the best-ever rental income was recorded in 2007. These factors conspired to produce another exceptional performance for SA real estate," Garrun said.