IPD has released the results for the first ever SAPOA / IPD South Africa Biannual Property Indicator, based on capital growth and income receivable recorded for the six months January to June 2008. This series updates the SAPOA / IPD South Africa Annual Property Index which is released at the end of each calendar year. The June 2008 biannual indicator combines the full income, expenditure and valuation records of 11 property portfolios with a total capital value of R80bn, representing 60% of the annual IPD South Africa database.

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%, followed by the Retail sector at 2.1% and Offices at 5.9%.

Stan Garrun, Managing Director IPD South Africa, comments: “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.”