SAPOA Releases 2023 Valuations Report

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Despite fluctuations in bond yields, capitalisation rates have shown resilience, maintaining relative stability over recent years, according to the South African Property Owners Association (SAPOA) highly anticipated 2023 Valuations Report.
The report which offers insights into the performance and trends shaping the South African investment property landscape showed that despite shifts in both short-term and long-term bond yields, the All Property capitalisation rate settled at 8.3% by the end of 2023. This stability is significant, considering the broader economic context.
The report highlights that South African commercial properties may be relatively expensive compared to medium-term risk-free rates. This suggests limited potential for significant yield compression to drive capital growth.
Neighbourhood shopping centres experienced a slight weakening in cap rates but showed improvements in expected rental income growth.
Office Sector: Although starting from a low base, medium-term rental growth in freestanding offices showed improvement. However, the overall sentiment within the office sector remained cautious.
Strong demand continued to benefit valuations in the industrial property sector, with cap rates adjusting downwards across segments.
Despite slight variations in sector-specific performance, the overall investment property market saw relatively muted activity. The total value of investment property sales decreased to R23.5bn in 2023, with fluctuations observed across different property types and regions.
With projections for future market rental growth slightly upticking to 4.6%, the report emphasises ongoing challenges stemming from subdued economic expansion and expectations of prolonged higher interest rates.
“The 2023 Valuations Report offers valuable insights into the resilience of South African investment properties amidst evolving market dynamics. Despite challenges, the sector has demonstrated stability, with potential for cautious optimism in certain segments,” SAPOA stated.
The SAPOA Valuations Report is based on comprehensive data analysis, including insights from the MSCI South Africa Annual Property Index, covering 1,792 independently valued property assets collectively valued at R368bn as of December 2023.

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