Investment performance bodes well for international interest

Posted On Wednesday, 04 July 2007 02:00 Published by
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Offshore interest in commercial property in South Africa has no doubt been bolstered by our inclusion in the index of British-based research firm Investment Property Databank (IPD)

The IPD measures the performance of direct commercial property markets in 20 countries worldwide.

And what a performance SA commercial property has delivered in recent years. Though SA lost its place as the world's best performing market to Ireland last year, it still outperformed other countries included in IPD's index over the longer term, with annualised total returns of 27% over three years and 21% over five years.

SA's IPD index, with a capital value of R111bn, delivered total returns of 26,7% last year (see table). That was down from its all-time high of 30,1% achieved in 2005. Nevertheless, last year's performance was the second highest return achieved in IPD SA's 12-year history. SA's return of 26,7% was marginally lower than the 27,2% recorded last year in Ireland.

Among the IPD index results published so far for 2006, France came in at third place with total returns of 21,7%, followed by Canada (18,6%), Britain (18,1%), Denmark (17,8%) and New Zealand (17,8%).

Simon Fairchild, director of IPD in Britain, says it's likely that SA could claw its way back to the top of the performance rankings this year and next as foreign investors increasingly pour money into SA property.

After all, property investors are generally more interested in yield (income) than in capital growth. In that regard, SA is still streets ahead of most of its international counterparts, offering an average income return of 9,2% in 2006 compared with between 5% and 7% in most European countries, the US and Australia.

As Fairchild says: "Global investors are increasingly chasing income, and SA still offers higher yields than any other international market included in IPD's index."

Publisher: Finweek
Source: Finweek

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