SA property returns performance robust over 10 years, beating other asset classes

Samuel Ogbu, Chief Executive Officer of Liberty Properties says: “We are privileged to sponsor this landmark anniversary IPD conference. Property as an asset class is always popular and has a reputation for consistently strong results."

Over the last 10 years ungeared investment property in South Africa both listed and unlisted, delivered astounding compound total returns of 407%.

This performance is well ahead of other asset classes with equities delivering 314% total returns over the last decade, bonds 208% and cash 135%.

SA commercial property’s journey over the last 10 years, and its prospects for the next 10 years will be in the spotlight at 10th Annual Investment Property Databank (IPD) Property Investment Conference, in Cape Town this month.

Fittingly titled “10 Years Back – 10 Years Forward”, the conference considers a decade of SA property and sets out to provide strategic insight into opportunities that lie ahead.

Stan Garrun, managing director of IPD SA says: “The past decade has shown the SA commercial property sector to be very innovative and adaptive. We have never been at a more important crossroad as countries around the world reel from European contagion having just emerged from the property crash of 2008/9. Elsewhere, political upheaval and economic recession continue to negatively impact the markets. Thankfully and relatively speaking, SA was able to avoid the ill effects of many of these global trends. We embark on the next decade as a resilient and well structured sector; though not without challenge. Speakers at this conference will apply the best lessons of the past and imagine the geographies and investment patterns of the future; to counter the inevitable risks and take advantage of the opportunities that will arise”. 

Like the sector it represents, this conference has evolved to become the pre-eminent property event in the country. Sponsored by Liberty Properties, the conference promotes South African commercial property against other asset classes, both locally and globally.  

With an enviable line up of industry professionals speaking, the 10th IPD Investment Conference will continue its record of identifying future trends essential for property investment in a challenging global and domestic marketplace. 

The conference will provide access to leading lights in the property industry including Prof Francois Viruly of the University of Cape Town Department of Construction Economics and Management and Head of Listed Property Funds for Stanlib, Keillen Ndlovu.

Viruly reports that in the past ten years the SA property market experienced the strongest property boom since the 1960's.   

“Commercial property investors ventured into new geographic areas like SA townships and, more recently, across the African continent. The sector successfully adapted to a difficult financial environment from the global financial crises. It also effectively responded to operating cost increases exceeding the inflation rate and rental increases,” says Viruly.

At the same time, the SA listed property sector changed from an untouched and unloved asset class in 2002 into the most respected asset class in 2012, points out Ndlovu. 

The listed property sector has grown from less than 1% of the FTSE/JSE All Share Index in 2002 to over 3% in 2012. The rapid growth of the listed property sector, as well as new listings, has also offered new opportunities for investors across the sector.

Ndlovu says that listed property has been supported by consistent income growth which has been driven by a combination of economic growth and declining vacancies. “Office vacancies have fallen from about 23% in 2002 to about 10% in 2012. Overall, commercial property vacancies across the office, retail and industrial sectors have fallen from about 13% in 2002 to about 7% in 2012,” notes Ndlovu.

In the next 10 years the property market must adapt to several critical trends.  

The population density of SA cities is expected to rise significantly in the next decade. “While this will introduce new urban management challenges, it will also offer new opportunities in the residential and commercial property sectors,” says Viruly.

He believes investors will increasingly focus on opportunities that arise from rapidly changing transport systems. This will include development opportunities around, bus stations, railway stations and airports. 

“A changing transport network will also change the way suburbs connect and the access all income groups have to cities and property developments. The delivery of green buildings will become the norm, and the sector will continue to respond to changing work and retail trends,” says Viruly.

This should see a greater emphasis on mixed-use developments that successfully combine home, work, play and social amenities. The sector will also see the benefits arising from a growing middle class in SA and across the entire African continent. 

Ndlovu foresees the listed property sector growing with new listings, as well as property acquisitions and developments by existing counters. 

“This will improve size, choice and liquidity. Consolidation will also come into play at all levels in the listed property sector. This will further improve liquidity,” says Ndlovu.

The sector, which plays mainly in the customary retail, office and industrial sectors, may exploit opportunities in new sectors and regions, including the rest of Africa. A larger sector could also support specialised, sector-specific funds.

“As the sector grows bigger we could see most fund managers, who continuously overlook the sector, start to take it more seriously,” says Ndlovu. “Environmental, social and governance issues will also be given more attention by the investor community.”

Other speakers who will be sharing their insight at the conference include Vice Chancellor of University of the Free Sate Professor Jonathan Jansen, IPD UK Senior Director of Group Business Development Dr Peter Hobbs, Fund Chairman of Cornerstone Real Estate Advisers in Europe and Principal for Reid Advisers Ian Reid, Managing Director of Old Mutual Property Peter Levett, Stanlib Direct Property Investments Chief Investment Officer Amelia Beattie, Broll CEO Malcolm Horne and Research Manager Sanett Uys, Founding CEO of the Green Building Council of SA Nicola Milne, Director of Fortress Asset Managers Craig Hallowes and Research Director of IPD South Africa, Jess Cleland.

The 10th Annual IPD Property Investment Conference takes place on 18 and 19 July 2012 at Westin Grand Hotel Arabella Quays in Cape Town, South Africa. Click here to register