IPD has released the third Botswana Annual Property Consultative Index today in Gaborone.
The Index for the year to December 2013 produced a total return of 21.4% which is an improvement from 18.1% recorded for 2012, and comprised a 9.9% income return, coupled with 10.5% capital growth for the year. Headline inflation in Botswana for 2013, was 5.7%, down from 7.5% in 2012 – translating into an even greater improvement in total returns to investors and owners when viewed in real, inflation adjusted terms.
The top performing sector for 2013 was industrial property, followed by residential and retail. The industrial sector outperformed as a result of superior income return and a solid capital growth of 13.5%. The residential market had an outstanding year, mainly in terms of capital growth and delivered a total return of 24.4%, although the income return of 4.1% was relatively low.
The office sector underperformed relative to the other sectors, largely as a result of vacancy rates increasing from 1.9% to 5.9%. Rental growth was low at 4.3% and capital growth also underperformed at 5.6%. That said, the office market still delivered a reasonable total return of 16.5% for 2013.
The consultative index is drawn from the complete portfolio records of local property investors and this index release was sponsored by Botswana Insurance Fund Management (BIFM), who are also the founding sponsors of the report.
The results were launched at an event today in Gaborone, addressed by Mr Outule Bale, CEO, Khumo Property Asset as well as by guest speaker, Mr Monnane M. Monnane of the Botswana Institute for Development Policy Analysis (BIDPA), an independent trust that monitors the performance of the Botswana economy and the management of public policy implementation.
Launched in 2012, the IPD Botswana Annual Property Consultative Index measures ungeared total returns to directly held standing property investments from one open market valuation to the next. The figures represent the combined holdings of six leading local property investment portfolios: Botswana Insurance Fund Management Property Portfolio, Debswana Pension Fund, Letlole La Rona Limited, Motor Vehicle Accident Fund, Primetime Property Holdings Limited, and Turnstar Holdings Limited.
“We have moved into the third annual cycle of IPD returns reported for this vibrant market and are beginning to see definable trends as the sector grows. The sample has increased by almost BWP 1bn since the index was first released, with a combined value of BWP 3.3 bn spanning over 380,000 sq m recorded as of December 2013.” says Stan Garrun, Executive Director and Head of IPD South Africa.
“Much as expected, the office sector lagged the rest of the market with vacancies increasing threefold to 5.9%. Sub-inflation rental growth and capital growth was recorded. Retails were quite flat but stellar performance in the industrial and residential sector propelled the overall return to 21.4%.
“It will be crucial in the next year for more major players to participate in this process to further improve the index; which at these levels of performance, will help pave the way for opening up Botswana’s property investment sector to a range of new buyers, and provide important diagnostic tools for the local industry.
“Analysts and investors both in Botswana and abroad increasingly expect better data and more transparency and comparability” adds Garrun.