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SAPOA: SA real estate records positive returns in 2023 compared to global markets

South African investment property continued to deliver positive returns in 2023 despite many global markets experiencing negative returns due to high interest rates, according to SAPOA’s latest South Arica Property Trends Report.

These findings were shared by Eileen Andrew, Vice President at MSCI, during SAPOA’s recent Research Webinar, noting that the South African real estate market has remained resilient with returns surpassing those in global markets which have been more adversely affected by high interest rates and bond yield movements.

Internationally, there has been a noticeable capital outflow from real estate into other assets due to decreasing valuations. Office properties in many major global cities have seen significant money outflows while residential properties have benefitted.

Infrastructure assets, such as social infrastructure, health, and education, are attracting interest due to their potential to deliver stable returns amidst economic uncertainties.

South Africa presents substantial opportunities for infrastructure investment, which could address the government’s struggle to deliver essential services and provide investors with the returns they seek.

The scope for infrastructure investment in South Africa is vast, offering real opportunities for property owners to get involved,” added Andrew.

South African property funds have also invested abroad in markets such as Poland, Hungary, the Czech Republic, Portugal, and Spain, where positive returns have been observed. These markets have recently outperformed larger, more developed markets in Europe and the US.

South African property funds fared better compared to many global markets in 2023, less affected by higher-for-longer interest rates and maintaining positive returns.

Retail property returns in South Africa improved in 2023, recording their best total return in five years with valuations becoming more realistic and in line with investor expectations. Trading density growth remained positive on an inflation-adjusted basis, ending March 2024 at 6.2%.

Office properties in South Africa exhibited a wide range of performance with high demand in certain nodes while others struggled. Internationally, office properties in many major cities are facing challenges due to increased vacancies and muted deal volumes driven by the work-from-home trend.

The South African Property Owners Association (SAPOA) South Africa Property Trends Report, compiled by MSCI, provides valuable insights into the current state of the real estate market, highlighting the resilience and opportunities within the domestic market.