SA real estate slows: report

The results of the first Sapoa/IPD South Africa biannual property indicator released today show that South African real estate has slowed.

The indicator revealed an All Property total return of 7.3% for the six months to June 2008, led by the industrial sector, which returned 11.1%, followed by offices at 8.1% and the retail sector at 5.9%.

Although comparable numbers for the previous six months are not available, the total returns for the six month period are clearly well below the stellar returns seen in South African real estate markets in recent years, which delivered an All Property total return of more than 27% per annum in each of the last three consecutive calendar years.

Reduced capital growth is the primary driver behind the tail-off in the recent record overall returns. Industrials posted a resilient 6.4% capital growth over the six month period under review, while the office sector produced 3.7% and the retail sector a mere 1.9%.

Income return over the first half of the year, however, displayed a broadly consistent picture across the sectors with industrials, offices and retail returning 4.5%, 4.3% and 3.9%, respectively.

Overall, the All Property capital growth was just 3.1%, while the All Property income return was 4.1%.

Little separated the sectors in terms of income yield, with the industrial yield remaining fairly stable at 8.4%, while offices and retails moved out to 8.2% and 7.6%, respectively.

Vacancy rates were unsurprisingly the lowest in the top-performing sector, with industrials at just 1.2%, the retail sector at 2.1% and offices at 5.9%.

"These results are a stark but not surprising reflection of a more difficult environment for property. High interest rates, tighter economic conditions and global uncertainty have all played a part. The 2008 figures due early next year will be very interesting," Stan Garrun, managing director IPD South Africa.

The Sapoa/IPD South Africa biannual property indicator is based on capital growth and income receivable recorded for the six months January to June 2008 and combines the full income, expenditure and valuation records of 11 property portfolios with a total capital value of 80 billion, representing 60% of the annual IPD South Africa database.

The IPD is a global information business, dedicated to the objective measurement of commercial real estate performance.

Source: I-Net Bridge

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