Herald Correspondent

Property investments listed on the JSE beat the return on general shares and were among the best in the world, a new survey showed yesterday.

The investments returned 27,7% last year, slightly higher than 27,1% in 2006, the 2007 SA African Property Owners‘ Association and Independent Property Databank (IPD) SA index showed. IPD is part of an international group which conducts surveys in many major countries.

Its SA managing director, Stan Garrun, said the index was based on a survey of 70% of the total property assets held by financial institutions and property companies, and showed that the last three years had seen the highest returns in the history of the index.

The figures showed the property sector had outperformed the equity market‘s 19,2% in 2007, said Garrun.

“The strong return was mainly driven by capital appreciation, which at 17,7% is the second highest recorded. Income return of 8,6% was slightly down on the 2006 value of 9,2%, due to capital values realised. Capital growth is underlined by a combination of income growth of 17,6% – the highest in IPD history – and a further reduction in vacancy levels at only 3,1%.

“But yields continued to fall in all sectors, with the all-property yield down 7,6% at the 2007 year-end.”

Garrun said the top performing sector in 2007 was industrials with a total return of 33,6%, followed by offices at 30,8% and retail at 26%.

The survey also showed local property returns were ahead of the nine countries covered by IPD index so far.

New Zealand returned 22,4%; Australia 18,1%; Canada 16,1%; Sweden 14,9% and Finland 11,3%.

Other IPD index results were the Netherlands at 11,3%, Denmark at 10,2%, Ireland 9,9% and the UK -3,4%.

“Returns in 2007 remained strong, buoyed by surging demand combined with supply-side constraints,” said Garrun. But the retail sector had dipped on slower consumer spending, while offices and industrials “powered ahead on strong fundamentals”.

Returns from industrials was 33,6% from 31,1% in 2006, with the office market second with 30,8% from 24,5% a year earlier. Returns from the retail property market dipped to 26%, from 27,4% in 2006.

“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 South Africa real estate.”

Meanwhile, First National Bank property strategist John Loos forecast yesterday that office property would provide the best returns as the sector was less likely to be affected by slowing economic growth and consumer spending.

“My bet is on office property. Industrial property might drop a notch or two and the retail property is set for a longer slowdown,” he said.

Source: The Herald