MSCI South Africa, a leading provider of research-driven insights, has unveiled its latest Property Trends, Valuations, and Income & Costs report for the year 2023. In a landscape marked by economic turbulence and global uncertainty, South Africa has emerged as a beacon of stability, achieving a remarkable total return of 8.7% in 2023.
The MSCI report released during the South African Property Owners Association (SAPOA) webinar revealed that South Africa’s real estate sector showcased resilience in 2023, with a total return of 8.7%. While income return improved to 8.3%, capital growth slowed to 0.4%. Notably, property fundamentals saw improvement in terms of vacancy rates, rental growth, and net income growth.
Globally, the reflation crisis has cast a shadow over property values across sectors, presenting opportunities for savvy buyers. Capital growth was hindered by yield impact, reflecting valuer sentiment, while income impact underscored the role of growing net income in supporting valuations.
Despite improvements in property fundamentals, costs continue to outpace inflation, resulting in a higher cost-to-income ratio. Capital expenditure is revealed to be non-yield enhancing, suggesting a potential link to investments in non-grid energy sources.
According to Eileen Andrew, Vice President of MSCI South Africa, the property market’s performance reflects a delicate balance between income and capital growth. While income return remained robust, capital growth faced headwinds from yield impact. Andrew emphasizes the importance of prudent investment strategies amidst evolving market dynamics.
MSCI South Africa’s Property Trends Report for 2023 offers a nuanced understanding of the real estate landscape, both locally and globally. Against a backdrop of global challenges, South Africa’s resilience shines through, presenting opportunities for investors to capitalise on evolving market dynamics. As the world navigates uncertain terrain, the insights provided by MSCI South Africa serve as a valuable guide for unlocking the full potential of the real estate sector.