SAPOA/IPD SA Property Index releases 2011 property performance in March

MD of IPD SA, Stan Garrun

The findings will reveal the current state of the investment property market and mark 15 years of a property index in South Africa, tracking the commercial property market's highs and lows.

Will the 2010 mini-recovery in the commercial property market prove to be a false start to recovery, or will the 2011 performance continue to build on the turnaround? In 2010, the property market returned to double-digit annual returns of 13.3 per cent after 2009's 11-year low of 8.8 per cent. Indicative results to June 2011 suggest that growth was flat in the first half of the year.

Originally launched in 1997 as SAPIX, IPD became involved in 2001 and the index adopted its current structure as the SAPOA/IPD Index two years later in 2004. The first biannual results were introduced in 2009.

Weighing up global vs South African conditions

Globally, harsh economic conditions prevailed, specifically negative growth in the Eurozone. A weak domestic economy, declining confidence among both consumers and businesses and the continued rise in operating costs, chiefly electricity, continue to place pressure on commercial property returns.

In South Africa, the stable interest rate environment, rising household income supporting consumer spending and South African property's ability to remain resilient throughout the global downturn, may prop up property returns.

The results will show investors and analysts which sectors of the market are recovering, stagnant or backsliding. They analyse the fundamentals of property supply and demand: vacancies, rentals, values and more. In addition, they signpost the way to market leading performance within different sectors, property types and regions, and post warning signs about where the most risk is housed within the market.

Property performance benchmark

Stan Garrun, MD of IPD SA comments, "A keen focus on sticking to the basics is evident in the market, but so too is emerging innovation and smart strategies to deliver performance, despite the difficult environment. Regardless of where the market is in the property cycle, investors need properties to be profitable. These results will show how successful fund managers have been in navigating the obstacles to create better value for their clients. Property owners have come to rely on IPD data over the past 15 years as a benchmark of performance. With 2011's results, they have at their disposal a 15-year transparent reference of consistent commercial property performance reporting in South Africa."

Warren Schultze, CEO of Eris Property Group adds, "Over the past 15 years, the index has become the decisive standard for measuring unlisted property returns. The transparency it provides for commercial property has consistently added to the credibility of this asset class. It has undoubtedly become the 'go-to' resource for local and international investors considering commercial property investment in South Africa."

The SAPOA/IPD South Africa Annual Property Index was based on a sample of 1,970 properties from 25 portfolios covering R184.9 billion at the end of December 2010.